Bounds on Repayment Behavior: Evidence for the Consumer Credit Market

59 Pages Posted: 23 Nov 2007

See all articles by Charles Grant

Charles Grant

University of Reading

Mario Padula

University "Ca' Foscari" of Venice; CSEF

Date Written: November 2007

Abstract

How does the punishment for default affect repayment behavior? We use administrative data, provided by the leading Italian lender of unsecured credit to the household sector, to analyze households repayment behavior. Administrative data are particularly well suited to study what factors are responsible for default, but raise a fundamental econometric problem, since they identify the determinants of repayment behavior only for those who are granted credit. To overcome this problem, we provide upper and lower bounds on the determinants of repayment behavior. Moreover, we show how to use the restrictions from the theory to narrow the bounds.

Keywords: Manski Bounds, Consumer Credit, Default

JEL Classification: D14, K42, O17

Suggested Citation

Grant, Charles and Padula, Mario, Bounds on Repayment Behavior: Evidence for the Consumer Credit Market (November 2007). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 26/07. Available at SSRN: https://ssrn.com/abstract=1031909 or http://dx.doi.org/10.2139/ssrn.1031909

Charles Grant (Contact Author)

University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Mario Padula

University "Ca' Foscari" of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy
+390412349181 (Phone)
+390412349176 (Fax)

CSEF

Via Don Melillo I
Fisciano, Salerno, 84084
Italy

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