Data and Welfare in Credit Markets

51 Pages Posted: 28 Jan 2022

See all articles by Mark Jansen

Mark Jansen

University of Utah - Department of Finance

Fabian Nagel

University of Chicago - Booth School of Business

Constantine Yannelis

University of Chicago

Anthony Lee Zhang

University of Chicago - Booth School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: January 24, 2022

Abstract

We show how to measure the welfare effects arising from increased data availability. When lenders have more data on prospective borrower costs, they can charge prices that are more aligned with these costs. This results in an increase in total social welfare, and a transfer of surplus from borrowers to lenders. The magnitudes of the welfare changes can be estimated using only quantity data and variation in prices. We apply the methodology using administrative data on bankruptcy flag removals, and find that flag removal increases the surplus of previously bankrupt consumers substantially, at the cost of decreasing total social welfare modestly, suggesting that flag removals are a reasonably efficient tool for redistributing surplus to previously bankrupt borrowers.

Keywords: Data, Welfare, Credit Markets

JEL Classification: D14, G10, G33, G5

Suggested Citation

Jansen, Mark and Nagel, Fabian and Yannelis, Constantine and Zhang, Anthony Lee, Data and Welfare in Credit Markets (January 24, 2022). Available at SSRN: https://ssrn.com/abstract=4015958 or http://dx.doi.org/10.2139/ssrn.4015958

Mark Jansen

University of Utah - Department of Finance ( email )

David Eccles School of Business
1655 Campus Center Dr.
Salt Lake City, UT 84112
United States
801-213-6910 (Phone)

HOME PAGE: http://eccles.utah.edu/team/mark-jansen/

Fabian Nagel

University of Chicago - Booth School of Business ( email )

5807 S Woodlawn Ave
Chicago, IL 60637
United States

Constantine Yannelis

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Anthony Lee Zhang (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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