Scarcity and Consumers’ Credit Choice

53 Pages Posted: 7 Oct 2016 Last revised: 5 Jul 2018

See all articles by Marieke Bos

Marieke Bos

Swedish House of Finance - Stockholm School of Economics

Chloe Le Coq

SITE-Stockholm School of Economics

Peter van Santen

Sveriges Riksbank; Netspar

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2017


This paper documents that high-educated borrowers choose lower loan to value ratios when their budget constraints are exogenously tighter. In contrast, low-educated borrowers do not respond to temporary elevated levels of scarcity. This lack of response translates into a significantly higher probability to default and an 11.6 percent increase in borrowing cost. We show that a difference in access to liquidity and/or buffer stocks cannot explain our results. Instead a framework where the awareness of self-control problems is positively correlated with education explains why high-educated, but not low-educated, consumers choose a lower LTV as a commitment device. Our findings highlight that increased levels of scarcity risk reinforcing the conditions of poverty

Keywords: household finance, credit choice, scarcity, time preferences

JEL Classification: G41, D12, D14, D15, D91

Suggested Citation

Bos, Marieke and Le Coq, Chloe and van Santen, Peter, Scarcity and Consumers’ Credit Choice (May 1, 2017). Swedish House of Finance Research Paper No. 16-19, Available at SSRN: or

Marieke Bos (Contact Author)

Swedish House of Finance - Stockholm School of Economics ( email )

Drottninggatan 98
111 60 Stockholm


Chloe Le Coq

SITE-Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383


Peter Van Santen

Sveriges Riksbank ( email )

Brunkebergstorg 11
Stockholm, SE-103 37
004687870569 (Phone)
00468210531 (Fax)

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE

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