The Brazilian Payroll Lending Experiment

Christiano Arrigoni Coelho (), Bruno Funchal () and Joao De Mello
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Christiano Arrigoni Coelho: Banco Central do Brasil e Department of Economics PUC-Rio

No 573, Textos para discussão from Department of Economics PUC-Rio (Brazil)

Abstract: In 2004, Brazil provided an interesting natural experiment concerning personal credit. A new law was enacted allowing banks to offer loans with repayment through automatic payroll or social security benefit deduction, thus removing a significant part of the moral hazard problem by eliminating the choice of default when debtors are able to pay their loans out of their wages. We estimate the impact of the new law using car loans as a control group. We find that, at the industry level, the new law has caused a reduction in interest rates and an increase in the volume of personal credit.

Keywords: Credit markets, collateral, difference-in-differences. JEL Code: G21; D01; C33; K00; E44. (search for similar items in EconPapers)
Pages: 22p
Date: 2010-04
New Economics Papers: this item is included in nep-ban, nep-law and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Journal Article: The Brazilian Payroll Lending Experiment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:rio:texdis:573

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