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EDUCATION PREMIUM IN THE ONLINE PEER-TO-PEER LENDING MARKETPLACE: EVIDENCE FROM THE BIG DATA IN CHINA

Juanjuan Chen (), Yabin Zhang () and Zhujia Yin
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Juanjuan Chen: School of Economics and Trade, Hunan University (HNU), 109 Shijiachong Road, Yuelu District, Changsha City, Hunan Province, 410006, P. R. China
Yabin Zhang: School of Economics and Trade, Hunan University (HNU), 109 Shijiachong Road, Yuelu District, Changsha City, Hunan Province, 410006, P. R. China
Zhujia Yin: School of Economics and Management, Changsha University of Science and Technology (CSUST), 960, 2nd Section, Wanjiali South RD, Changsha City Hunan Province, 410114, P. R. China

The Singapore Economic Review (SER), 2018, vol. 63, issue 01, 45-64

Abstract: We study the education premiums in the online peer-to-peer (P2P) lending marketplace in which individuals bid on unsecured microloans applied by individual borrowers. Using more than 100,000 consummated and failed listings from the largest online P2P lending marketplace in China — Paipaidai.com, we examine whether higher education level lead to lower interest rates and lower risk of default. We find that controlling for other characteristics of borrowers, borrowing rates of borrowers with bachelor’s degrees is 0.141 percent higher than that of borrowers with associate’s degrees, and that female borrowers’ education premiums were higher than their male counterparts. With regard to loan performance, borrowers with bachelor’s degrees are 13% less likely to default than the borrowers with associate’s degrees. Therefore, the education premiums in the P2P lending marketplace are rational.

Keywords: Education premium; peer-to-peer lending; P2P lending; rationality; microloan (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S0217590818410023

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