Tax Rebates and the Cycle of Payday Borrowing

Paige Marta Skiba

American Law and Economics Review, 2014, vol. 16, issue 2, 550-576

Abstract: I examine whether receipt of a $300 tax rebate by payday borrowers affects their likelihood of borrowing, loan size, or default behavior. Results from fixed-effects models show that the rebate decreases the probability of taking out a payday loan in the short run. These impacts are most apparent among credit-constrained, infrequent borrowers. Those who take out loans around the time of the rebate borrow amounts typical of their normal borrowing behavior but are more likely to default. Overall, however, the rebate's effects are small and short-lived, suggesting a muted response to this cash windfall in payday borrowing and repayment.

Date: 2014
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