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Consumption Smoothing or Consumption Binging? The effects of government-led consumer credit expansion in Brazil

Gabriel Garber, Atif Mian, Jacopo Ponticelli and Amir Sufi

No 29386, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Brazil initiated a major credit expansion program through government banks in 2011. The program primarily targeted public sector workers with offers of payroll-backed loans. Using individual-level administrative data we find that the program led to a 15 percentage point rise in debt to initial income for public sector workers. We develop a new method for estimating workers' expected income growth, and show that ''consumption smoothing'' cannot explain the rise in consumer borrowing. Instead, the evidence supports ''consumption binging'': less financially sophisticated workers borrowed more at high real interest rates, and experienced both higher consumption volatility and lower average consumption.

JEL-codes: D12 D14 E21 E32 G21 G28 G53 O16 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-fle, nep-isf and nep-mac
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