consumption and debt response to unanticipated income shocks evidence from a natural experiment in singapore abstract this paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock consumption rose significantly after th

debt and financial expectations an individual and household level analysis in this article we show that optimistic financial expectations impact positively on both the quantity of debt and the growth in debt at the individual and household levels our theoretical model shows that this association is predicted under a variety of plausible scenarios in the empirical analysis we explore the determinants of debt and of growth in debt using british data we find convincing support for our theoretical priors and show that it is optimistic financial expectations per se that are important in influencing debt rather than the accuracy of individuals predictions regarding their future financial situation jel d18 d84 d91

the effect of unionism on workers valuation of future pension benefits this paper investigates the impact of unionism on the pension benefits workers expect to receive on retirement the valuation of future benefits by workers rather than actual employer expenditures on pensions is examined because expected benefits should be the more important variable in explaining the labor market behavior of individual workers analysis of data for middle aged men taken from the national longitudinal surveys suggests that union workers are more knowledgeable than nonunion workers about their retirement benefits and also the average union worker expects to receive a pension higher than that expected by the average nonunion worker more specifically among firms providing pensions the expected benefits are actually lower in union firms than in nonunion firms but that difference is outweighed by the fact that nonunion firms are much more likely than union firms to have no pension plan at all

consumer debt stress changes in household debt and the great recession this research examines psychological debt stress and changes in household debt holdings for consumers during the great recession using data from a monthly national u s household survey covering the period 2006 through 2012 debt stress measures in the population rose by over 50 at the bottom of the recession determining relative stress for eight different types of household debt we find that noncollateralized debts are more stressful than collateralized debt and that during the recession the composition of debt shifted away from collateralized debt and toward noncollateralized our empirical results show that women and hispanics experienced higher measured levels of stress jel d12 d18 i introduction in the latter part of the twentieth century household debt began to rise to high levels in the united states accompanying this there was an upsurge in reports concerning psychological debt stress coming from financial and family counselors health care professionals employers and others these reports pointed to a wide range of health family and job problems for americans arising from this increase in debt after 2007 events in the housing market marked the onset of the great recession and financial crisis many households faced declining home prices and foreclosure as well as changes in other asset values and incomes there was a general tightening of credit and changes in some lending practices by banks here we seek to add additional understanding to changes in consumer debt stress 1 during the great recession by relating them to changes in eight different types of debt holdings during this period we use data covering 2006 through 2012 from the consumer finance monthly survey cfm a national random telephone survey of household finances taken on a monthly basis from a cross

how important is variability in consumer credit limits abstract using a large panel this paper first demonstrates that individuals gain and lose access to credit frequently the estimated credit limit volatility is larger than most estimates of income volatility and varies over the business cycle within a model variable credit limits create a reason for households to hold both high interest debts and low interest savings at the same time using the estimated credit volatility the model explains why around one third of american households engage in this credit card puzzle the approach also offers an important new channel through which financial system uncertainty can affect household decisions

how do individuals repay their debt the balance matching heuristic we study how individuals repay their debt using linked data on multiple credit cards repayments are not allocated to the higher interest rate card which would minimize the cost of borrowing moreover the degree of misallocation is invariant to the economic stakes which is inconsistent with optimization frictions instead we show that repayments are consistent with a balance matching heuristic under which the share of repayments on each card is matched to the share of balances on each card balance matching captures more than half of the predictable variation in repayments and is highly persistent within individuals over time

marshallian factor market externalities and the dynamics of industrial localization abstract when an industry has thus chosen a locality for itself it is likely to stay there long so great are the advantages which people following the same skilled trade get from near neighborhood to one another a localized industry gains a great advantage from the fact that it offers a constant market for skill employers are apt to resort to any place where they are likely to find a good choice of workers while men seeking employment naturally go to places where there are many employers who need such skill as theirs the advantages of variety of employment are combined with those of localized industries in some of our manufacturing towns and this is a chief cause of their continued growth alfred marshall principles of economics 8th ed pp 271 272 1920

borrowing constraints and credit demand in a developing economy summary this paper investigates the determinants of credit demand in the presence of borrowing constraints in a developing economy we model the determinants of observed debt for chilean households while accounting for selection bias and the endogeneity of their income and specific household assets using a novel chilean dataset we estimate the relationship between household characteristics and consumer and mortgage debt we find substantial differences in the nature of these relationships across the types of debt for example we find that the income elasticity for consumer debt is greater than 1 whereas for mortgage debt it is not the results suggest the increased availability of credit combined with the aging of the chilean population is likely to drastically change the distribution and level of chilean debt these findings are particularly relevant for other developing economies currently experiencing rapid income and debt growth copyright 2015 john wiley sons ltd

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

testing the response of consumption to income changes with noisy panel data this paper tests the rational expectations lifecycle model of consumption against i a keynesian model and ii the rational expectations lifecycle model with imperfect capital markets the tests are based upon the relative responsiveness of consumption to income changes that can be predicted from past information and income changes that cannot he predicted the tests allow for measurement error in income the results reject the keynesian model and generally support the lifecycle model but the results are not sufficiently precise to rule out the possibility that some households are liquidity constrained measurement error has a strong influence on the relationship between consumption and income

constrained after college student loans and early career occupational choices abstract in the early 2000s a highly selective university introduced a no loans policy under which the loan component of financial aid awards was replaced with grants we use this natural experiment to identify the causal effect of student debt on employment outcomes in the standard life cycle model young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings the presence of debt has only income effects on investment decisions we find that debt causes graduates to choose substantially higher salary jobs and reduces the probability that students choose low paid public interest jobs we also find some evidence that debt affects students academic decisions during college our estimates suggest that recent college graduates are not life cycle agents two potential explanations are that young workers are credit constrained or that they are averse to holding debt we find suggestive evidence that debt reduces students donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year we argue this result is more likely consistent with credit constraints than with debt aversion

regulating consumer financial products evidence from credit cards we analyze the effectiveness of consumer financial regulation by considering the 2009 credit card accountability responsibility and disclosure card act we use a panel data set covering 160 million credit card accounts and a difference in differences research design that compares changes in outcomes over time for consumer credit cards which were subject to the regulations to changes for small business credit cards which the law did not cover we estimate that regulatory limits on credit card fees reduced overall borrowing costs by an annualized 1 6 of average daily balances with a decline of more than 5 3 for consumers with fico scores below 660 we find no evidence of an offsetting increase in interest charges or a reduction in the volume of credit taken together we estimate that the card act saved consumers 11 9 billion a year we also analyze a nudge that disclosed the interest savings from paying off balances in 36 months rather than making minimum payments we detect a small increase in the share of accounts making the 36 month payment value but no evidence of a change in overall payments jel codes d0 d14 g0 g02 g21 g28 l0 l13 l15

from the fringe to the fore labor unions and employee compensation conventional wisdom suggests that labor unions raise worker wages while the newer empirical literature finds only negligible earnings effects i reconcile this apparent contradiction by arguing th

risk based pricing of interest rates for consumer loans abstract by focusing on observable default risk s role in loan terms and the subsequent consequences for household behavior this paper shows that lenders increasingly used risk based pricing of interest rates in consumer loan markets during the mid 1990s it tests three resulting predictions first the premium paid per unit of risk should have increased over this period second debt levels should have reacted accordingly third fewer high risk households should have been denied credit further contributing to the interest rate spread between the highest and lowest risk borrowers for people obtaining loans the premium paid per unit of risk did indeed become significantly larger after the mid 1990s for example for a 0 01 increase in the probability of bankruptcy the corresponding interest rate increase tripled for first mortgages doubled for automobile loans and rose nearly six fold for second mortgages additionally changes in borrowing levels and debt access reflected these new pricing practices particularly for secured debt borrowing increased most for the low risk households who saw their relative borrowing costs fall furthermore while very high risk households gained expanded access to credit the increases in their risk premiums implied that their borrowing as a whole either rose less or sometimes fell

household saving micro theories and micro facts in this survey we review the recent theoretical and empirical literature on household saving and consumption the discussion is structured around a list of motives for saving and how well the standard theory captures these motives we show that almost all of the motives for saving that have been suggested in the informal saving literature can be captured in the standard optimizing model particular attention is given to recent work on the precautionary motive and its implications for saving and consumption behavior we also discuss the behavioral or psychological approach that eschews the use of standard optimization techniques and focuses instead on direct consideration on saving we provide a section on facts who save and how much we then discuss informally the recent decline in the u s saving rate and whether the theory is of much use in understanding this and other changes in aggregate saving rates over time we do not find any convincing explanation for the change in saving rates we also discuss some analyses of saving behavior over the life cycle addressing such questions as whether households save enough for retirement and whether the consumption patterns of older households can be rationalized within a simple life cycle model we also review a great number of studies of the consumption euler equations based on our analysis of the studies cited we conclude that there is still mixed evidence that consumption is excessively sensitive to income we also examine in depth the recent empirical literature on the precautionary motive we conclude that although some households do seem to have a significant precautionary motive at some points in their life cycle this motive is not so strong empirically as some investigators suggest

do banks pass through credit expansions to consumers who want to borrow we examine the ability of policymakers to stimulate household spending during the great recession by reducing banks cost of funds using panel data on 8 5 million credit cards and 743 credit limit regression discontinuities we find that the one year marginal propensity to borrow mpb is declining in credit score falling from 59 for consumers with fico scores below 660 to essentially zero for consumers with fico scores above 740 we use the same credit limit discontinuities combined with a model of lending to estimate banks marginal propensity to lend mpl out of a decrease in their cost of funds for the lowest fico score consumers higher credit limits sharply reduce profits from lending limiting banks incentives to pass through credit expansions to these consumers we conclude that banks mpl is lowest for consumers with the highest mpb and discuss the implications for policies that aim to stimulate the economy through banks

testing for liquidity constraints in euler equations with complementary data sources previous tests for liquidity constraints using consumption euler equations have frequently split the sample on the basis of wealth arguing that low wealth consumers are more likely to be constrained we propose alternative tests using different and more direct information on borrowing constraints obtained from the 1983 survey of consumer finances in a first stage we estimate probabilities of being constrained which are then utilized in a second sample the panel study of income dynamics to estimate switching regression models of the euler equation our estimates indicate stronger excess sensitivity associated with the possibility of liquidity constraints than the sample splitting approach

credit card debt and default over the life cycle this paper solves an empirically parameterized model of life cycle consumption which allows for uncollaterized borrowing and the possibility of default the simulation results show that i social stigma and credit limit have a very large impact on default rates ii education level also has a significant effect on the probability of default namely through differences in the shape of lifetime labor income profiles and iii the response of simulated default rates to labor income shocks is determined by the nature of labor income uncertainty temporary versus permanent additionally the model generates simultaneous consumer holdings of credit card debt and liquid assets

a portfolio view of consumer credit abstract to compute risk adjusted returns and gauge the volatility of their portfolios lenders need to know the covariances of their loans returns with aggregate returns we use unique credit bureau data to measure individuals covariance risk i e the covariance of their default risk with aggregate consumer default rates and more generally to analyze the distribution of credit including the effects of credit scores we find significant heterogeneity in covariance risk across consumers also the amount of credit they obtain significantly increases with their credit scores and decreases with their covariance risk especially revolving credit though the effect of covariance risk is smaller

the implicit pension contract developments and new directions pension economics has emerged as a separate literature over the past decade some of the early pension work was devoted to financial issues including implications of pensions for savings rates and portfolio allocation most new developments however have stemmed from research surrounding labor markets this research has led to an implicit contract theory of pensions a theory that has pensions playing a more complicated role in worker firm relation than heretofore realized the theory explains much of economic behavior in labor markets and bridges a gap between labor and financial literatures this essay describes the genesis for these ideas and traces some of the most important research results in the area an equal amount of spece is devoted to a consideration of likely directions for future research

consumers use of debit cards patterns preferences and price response debit card use at the point of sale has grown dramatically in recent years in the united states and now exceeds the number of credit card transactions however many questions remain regarding patterns of debit card use consumer preferences when using debit and how consumers might respond to explicit pricing of card transactions using a new nationally representative consumer survey this paper describes the current use of debit cards by u s consumers including how demographics affect use in addition consumers stated reasons for using debit cards are used to analyze how consumers substitute between debit and other payment instruments we also examine the relationship between household financial conditions and payment choice finally we use a key variable on bank imposed transaction fees to analyze price sensitivity of card use and find a 12 decline in overall use in reaction to a mean 1 8 fee charged on certain debit card transactions we believe this represents the first microeconomic evidence in the united states on price sensitivity for a card payment at the point of sale

do consumers need more protection from small dollar lenders historical evidence and a roadmap for future research we summarize the current debate surrounding four small dollar credit products pawn loans vehicle title loans payday loans and cash installment loans from finance companies we review the contributions of scholars that inform this debate we underscore that users of these products fit the description of those whom consumer credit models predict benefit from these products many studies find that on average consumer use of small dollar credit products is at worst innocuous there are however findings of heterogeneity in borrowers experiences the disagreements surrounding these credit products and the difficulty in crafting the proper policy response stems from this heterogeneity jel d18 g23

house price shocks and household indebtedness in the united kingdom we use household panel data to explore the link between changes in house prices and household indebtedness both secured on housing assets and unsecured in the united kingdom we show that households which are borrowing constrained by a lack of housing equity as collateral make greater use of unsecured debt such as credit cards or personal loans in response to rising house prices which relax this constraint such households are more likely to refinance and to increase their indebtedness relative to unconstrained households however for most households house price movements appear to have little impact on indebtedness

evidence on the relationship between housing and consumption in the united states a state level analysis we estimate the dynamic effects of u s housing market shocks on state level spending and home prices from a dynamic common factor model and identify housing demand and supply shocks using a sign restrictions approach while state level spending and house prices gradually respond positively and persistently to aggregate housing demand shocks there is significant variation across states in the magnitude of these responses cross state regressions of the estimated responses on an index of mortgage market development suggest that spending in states with greater opportunities for home equity borrowing is more sensitive to housing demand shocks than in states with fewer opportunities which is consistent with the prominence of a collateral channel over a wealth channel in explaining the link between housing and the overall economy

household expenditure and the income tax rebates of 2001 using questions expressly added to the consumer expenditure survey we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis we exploit the unique randomized timing of rebate receipt across households households spent 20 to 40 percent of their rebates on nondurable goods during the three month period in which their rebates arrived and roughly two thirds of their rebates cumulatively during this period and the subsequent three month period the implied effects on aggregate consumption demand are substantial consistent with liquidity constraints responses are larger for households with low liquid wealth or low income

how effective are rewards programs in promoting payment card usage empirical evidence card issuers have mainly relied on rewards programs as their main strategy to increase usage however there is scarce evidence on the effectiveness of these programs this paper is addressing two topics which could have important managerial and public policy implications i it estimates the impact of rewards on the use of cards and ii it quantifies their economic effects in terms of the cash substitution we find that rewards may significantly modify choice for card payments their economic impact also varies significantly across types of rewards and merchant activities additionally rewards seem to be more effective for debit cards

unions pension wealth and age compensation profiles this paper examines the effect of unions on both the magnitude and distribution of pension benefits an analysis of experience during 1973 79 under a sample of defined benefit plans shows that beneficiaries retire at an earlier age under collectively bargained plans than under other plans receive larger benefits when they retire and receive larger increases in their benefits after they retire also benefit differentials within and across cohorts of retirees are smaller among union than nonunion beneficiaries the average union nonunion differential is therefore greater in total compensation wages plus pension benefits than in wages alone because pension benefits grow more rapidly with years of service in the nonunion sector however the total compensation differential narrows with age more quickly than the wage differential

reading the fine print information disclosure in the brazilian credit card market consumer credit regulations usually require that lenders disclose interest rates however in the absence of specific prominence requirements lenders can conceal the interest rate in the fine print while still complying with the law i examine the effect of such a strategy using a field experiment in brazil in which a credit card company offered their clients payment plans to pay off their balances using randomized contract interest rates and the degree of rate disclosure i show that most clients are rate sensitive whether or not rates are prominently disclosed the elasticity of payment plan enrollment with respect to the interest rate ranges from 0 711 to 0 880 high risk clients are an exception these clients are rate sensitive only when disclosure is prominent i also show that clients are influenced by nudges that favor longer term contracts conditional on enrollment the proportion of clients who choose a longer term contract is 40 percentage points higher when a longer term contract is feat

how do consumers avoid penalty fees evidence from credit cards using data from multiple card issuers we show that the most common penalty fee type incurred by credit card holders late payment fees declines sharply over the first few months of card life thi

changes in pension incentives through time a common assumption in the compensation and retirement literature often necessitated by lack of data is that company sponsored pensions are static institutions the present paper a study of the pension plans at 14 companies for the years 1960 1970 and 1980 challenges this assumption showing that pension schemes are actually quite dynamic over time specifically the authors find that in 1960 all 14 pension plans tended to reward delayed retirement but by 1980 many of the union plans actively encouraged early retirement nonunion plans in the sample however rewarded deferred retirement in all three years the observed changes in pension incentives may have resulted in part from statutory increases in the age at which workers can be forced to retire by an employer

estimating interest rate elasticities in consumer credit based on a unique dataset with monthly loan account data for three types of consumer credit i estimate the interest rate elasticity of the demand for credit across credit types the main result shows that elasticities vary depending on the credit type used in the estimation moreover borrower heterogeneity with respect to interest rate elasticities differs across credit types too these results have important implications for policy measures aimed at stimulating borrowing and consumption

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

social security and unsecured debt abstract in this paper we use a calibrated life cycle model to explore quantitatively ways of reducing the burden of social security in a world populated by both optimizing and rule of thumb consumers social security contributions force young households with upward sloping income profiles to save a sizeable portion of their income for retirement when their optimal consumption plan would likely have them either saving little or borrowing we first use household data to document that young households have accumulated social security contributions that are large relative to debt holdings then using a calibrated life cycle model we show that both allowing households to use social security wealth to pay off their debt and exempting young households from social security contributions but in both cases requiring higher contributions later mitigate many of the inefficiencies of social security from the perspective of life cycle financial planning specifically in our preferred experiment which exempts households whose heads are under 30 from making social security contributions we find that certainty equivalent consumption increases by 3 4 for optimizing households and by 3 3 for rule of thumb households

subprime consumer credit demand evidence from a lender s pricing experiment using a unique panel data set from a u k credit card company we analyze the interest rate sensitivity of subprime credit card borrowers in addition to all individual transactions and loan terms we have access to details of a randomized interest rate experiment conducted by the lender on existing inframarginal loans for the whole sample we estimate a statistically significant 3 4 reduction in monthly credit demand in response to a five percentage point increase in interest rates this aggregate response is small but it masks very interesting heterogeneity in the sample we find that only low risk borrowers who fully utilize their credit cards lower their credit demand significantly when faced with an increase in interest rates we also document that a five percentage point increase in interest rates generates significant additional revenue for the lender without inducing delinquency over a short horizon 2013 the author

why do poor people co hold debt and liquid savings i examine the use of flexible savings and loan accounts offered by safesave a microfinance institution serving poor slum dwellers in dhaka bangladesh i find that 59 per cent of the clients co ho

precommitments for financial self control micro evidence from the 2003 korean credit crisis we analyze high frequency micro panel data on customers of a major korean credit card company before and after the 2003 korean credit crisis and find evidence of pervasive precommitment behavior that is difficult to explain using standard economic theories 1 customers voluntarily reduce their credit card borrowing limits without any compensation 2 customers turn down interest free installment loan offers with high probability and 3 of the small fraction of customers who do accept interest free loan offers most precommit to pay off the loan over a shorter term than the maximum allowed term under the offer

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

borrowing during unemployment unsecured debt as a safety net this paper examines whether unsecured credit markets help disadvantaged households supplement temporary shortfalls in earnings by investigating how unsecured debt responds to unemployment induced earnings losses results indicate that very low asset households those in the bottom decile of total assets do not borrow in response to these shortfalls however other low asset households do borrow increasing unsecured debt by more than 11 cents per dollar of earnings lost in contrast wealthy households do not increase unsecured debt during unemployment the evidence suggests that very low asset households do not have sufficient access to unsecured credit to smooth consumption over transitory unemployment spells

the persistence of financial distress using recently available proprietary panel data we show that while many 35 us consumers experience financial distress at some point in the life cycle most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble roughly 10 of consumers are distressed for more than a quarter of the life cycle and less than 10 of borrowers account for half of all distress events these facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of heterogeneity in time preference but not otherwise

entrepreneurial finance credit cards and race this paper examines the impact of financial deregulation on entrepreneurship we assess the impact of credit card deregulation on transitions into self employment using state level removal of credit card interest rate ceilings following the us supreme court s 1978 marquette decision as a quasi natural experiment we find that credit card deregulation increases the probability of entrepreneurial entry with a particularly strong effect for black entrepreneurs we demonstrate that these effects are magnified in states with a history of racial discrimination and link the results to discriminationbased barriers to entry 2012 elsevier b v all rights reserved

competition as a savings incentive a field experiment at a homeless shelter abstract this paper describes a randomized field experiment testing the impact of a savings competition on the behavior of homeless individuals staying at a transitional shelter when monetary prizes were offered for achieving the highest saving rates within a particular month average savings increased by 80 a 30 increase in savings rate while income and attendance at case management meetings remained unchanged however repeating the competition in the following month had no effect because responsive savers selected out of the shelter after the first month in summary while a savings competition can increase savings in the short run its effect may be limited to the intensive margin and may diminish with repetition

the reaction of consumer spending and debt to tax rebates evidence from consumer credit data we use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates we estimate the monthly response of credit card payments spending and debt exploiting the unique randomized timing of the rebate disbursement we find that on average consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt but soon afterward their spending increased counter to the permanent income model spending rose most for consumers who were initially most likely to be liquidity constrained whereas debt declined most so saving rose most for unconstrained consumers

consumer credit liquidity and the transmission mechanism of monetary policy i introduction despite calls for its obsolescence the lending channel of the monetary transmission mechanism continues to generate interest among monetary economists recently den haan sumner and yamashiro 2007 find the loan supply effect is evident for consumer lending and real estate loans in data up to 2004 the loan supply effect or lending channel arises in the transmission mechanism if tight monetary policy forces banks to contract the supply of loans independent of a direct interest rate effect i e the liquidity effect and such a contraction has real effects for bank dependent borrowers although some such as perez 1998 and ashcraft 2006 have emphasized the lending channel s lack of relevance for the monetary transmission mechanism den haan sumner and yamashiro s 2007 results support a number of recent papers that offer detailed and disaggregated reasons why the channel is alive and well for certain lenders and borrowers for recent examples see nilsen 2004 and peek rosengren and tootell 2003 den haan sumner and yamashiro s 2007 findings suggest that the role of the consumer in the lending channel may be deserving of more attention 1 this paper asks whether consumer lending is or has become a significant component of the lending channel even if it was not thought crucial in lending channel studies published in the 1990s specifically i take a closer look at the statistical and possible economic significance of the consumer loan supply effect with disaggregated monthly consumer credit data from both commercial bank and nonbank sources and for the nonrevolving and revolving components of consumer credit from each source with this array of data i test the assumptions of the channel by considering whether households are forced to use more expensive nonbank credit as bank credit declines or that a household might switch into more costly revolving credit as installment loans decline to examine the consumer lending channel i estimate impulse response functions for the disaggregated consumer loan components mentioned above with the monthly data spanning 1968 2006 the sources of which are discussed later this strategy follows the examples of numerous lending channel studies that analyze the responses of disaggregated data to a monetary policy shock to discern evidence of the loan supply effect den haan sumner and yamashiro 2007 e g compare the behavior of commercial and industrial loans with real estate and consumer loans i follow the methods of previous studies in order to compare as closely as possible the results of this paper with the rich body of lending channel literature for robustness this paper estimates the impulse response functions from both a typical vector autoregression var model and using jorda s 2005 linear projection technique the latter method provides impulse response functions less prone to misspecification than in a var along with conditional standard errors to aid in the statistical inference of the responses see also jorda 2009 and further discussion in section iii finally for additional robustness i employ den haan sumner and yamashiro s 2007 identification strategy for isolating the loan supply effect in preview of the results ultimately the consumer credit data analyzed in this paper suggest that both the statistical and by extension the economic significance of the consumer loan supply effect is weak in the least the effect has weakened over time although monthly consumer credit data from commercial banks from 1968 through 2006 substantiate previous research on consumer lending matching the decline documented by gertler and gilchrist 1993 and den haan sumner and yamashiro 2007 after 1984 the responses of both nonrevolving and revolving consumer bank credit are not consistent with the lending channel instead both series increase similar to the result found by den haan sumner and yamashiro 2007 for commercial lending in fact total nonrevolving and revolving consumer credit increase for 2 yr after the monetary shock

the role of pensions in the labor market a survey of the literature because employer sponsored group pension plans entail agreements between workers and their employers explicitly linking future payment and employment they offer an unusual window into long term employment relationships this review of recent research on pensions explores how pensions influence employee compensation retirement turnover and other matters central to the determination of labor s price and quantity over time the authors also outline some unanswered questions and difficult to reconcile findings because the pension promise involves an explicit and relatively well documented set of statements regarding future contingent payment and employment an examination of the design and operation of employersponsored group pension plans can yield important insights into the long term employment relationship specifically pension research illuminates some important labor market questions in two ways it offers insight into an important element of compensation in its own right and it furthers our understanding of labor markets in which long term

credit elasticities in less developed economies implications for microfinance policymakers often prescribe that microfinance institutions increase interest rates to eliminate their reliance on subsidies this strategy makes sense if the poor are rate insensitive then microlenders increase profitability or achieve sustainability without reducing the poor s access to credit we test the assumption of price inelastic demand using randomized trials conducted by a consumer lender in south africa the demand curves are downward sloping and steeper for price increases relative to the lender s standard rates we also find that loan size is far more responsive to changes in loan maturity than to changes in interest rates which is consistent with binding liquidity constraints

fringe benefits and labor mobility interindustry factor mobility is a crucial determinant of the income distribution effects of exogenous changes in relative commodity prices this examination of interindustry variation in wages and profits using data from manufacturing industries from

an empirical analysis of personal bankruptcy and delinquency this article uses a new dataset of credit card accounts to analyze credit card delinquency personal bankruptcy and the stability of credit risk models we estimate duration models for default and assess the relative importance of different variables in predicting default we investigate how the propensity to default has changed over time disentangling the two leading explanations for the recent increase in default rates a deterioration in the risk composition of borrowers versus an increase in borrowers willingness to default due to declines in default costs even after controlling for risk composition and economic fundamentals the propensity to default significantly increased between 1995 and 1997 standard default models missed an important time varying default factor consistent with a decline in default costs debt issued by consumers is an understudied asset class there has been particularly little academic study of recent trends in default on this debt between 1994 and 1997 the number of personal bankruptcy filings in the united states rose by about 75 the 1 35 million filings in 1997 represented well over 1 of u s households delinquency rates on credit cards rose almost as sharply federal reserve bank of cleveland 1998 the resulting losses to lenders amounted to a sizable fraction of the interest payments they collect potentially raising the average cost of credit these trends in default both in bankruptcy and delinquency are especially surprising in light of the strong economy over the period they provide an unusually rich source of variation to test the stability of models that forecast personal default and of credit risk models more generally there are two leading explanations for these trends first the risk composition of borrowers might have worsened under the risk effect less

bank competition and consumer search over credit card interest rates this article models bank competition facing consumers with different search incentivesandfindsthatconsumerswithhighercreditcardbalanceshavelowerinterestrates giventheirriskclassduetotheirgreatersearcheffort italsofindsthatadefaulthistory leads to higher interest rates the equilibrium interest rate corresponding to risk type and motive borrowing versus convenience transactions is derived theoretically and the determinants of the interest rate are estimated using an original data set endogeneity of default is handled with a two equation system jel d14 d12 d11 this study analyzes market outcomes in the credit card industry when credit card banks ccbs compete with interest rates and cardholders have different motives for using credit cards the study takes account of the role of consumer motivation in a way that has not been captured by previous work in our model consumers react differently to interest rate offers depending on their motive for using credit cards i e borrowing versus conve

smart money the effect of education on financial outcomes household financial decisions are important for household welfare economic growth and financial stability yet our understanding of the determinants of financial decision making is limited exploiting exogenous variation in state compulsory schooling laws in both standard and two sample instrumental variable strategies we show that education increases financial market participation measured by investment income and equities ownership while dramatically reducing the probability that an individual declares bankruptcy experiences a foreclosure or is delinquent on a loan further results and a simple calibration suggest that the result is driven by changes in savings or investment behavior rather than simply increased labor earnings

long run price elasticities of demand for credit evidence from a countrywide field experiment in mexico we use randomized interest rates offered across eighty geographically distinct regions for twenty nine months by mexico s largest microlender to sketch the adjustment from a price change to a new equilibrium demand is elastic and more so over the longer run e g the dollars borrowed elasticity increases from 1 1 in year one to 2 9 in year three credit bureau data do not show evidence of crowd out although this and other null results are imprecisely estimated the lender s profits increase albeit noisily starting in year two but competitors do not respond by reducing rates these findings together with other results suggest that informational frictions are important and that cutting rates furthered compartamos banco s double bottom line of improving social welfare subject to a profitability constraint

context dependent drivers of discretionary debt decisions explaining willingness to borrow for experiential purchases mental accounting research suggests that consumers prefer borrowing for longer lasting purchases in order to receive benefits from the purchases as they pay for them in contrast two sets of archival data and five lab studies show that consumers are more willing to borrow for experiential versus material purchases even though experiential purchases tend to have a shorter physical duration further framing the same purchase as more experiential than material increases willingness to borrow this effect occurs because purchase timing is more important for experiential purchases a function of consumers aversion to missing out on planned consumption thus we moderate the proposed effect by varying whether the borrowing decision impacts planned consumption other differences between material and experiential purchases such as scarcity or expected happiness cannot similarly explain our results moreover our conceptualization allows us to reconcile the apparent contradiction between the previous and current research by examining the relative impact of purchase timing importance and payment benefit duration matching in different contexts i e purchasing and source of funding decisions

consumption volatility liquidity constraints and household welfare we evaluate the impact of increased income uncertainty and financial liberalisation in the us on consumption volatility and household welfare we estimate euler equations and measure the volatility of unpredictable changes in consumption as the squared residuals we directly control for liquidity constraints using survey of consumer finances data on access to credit and document that despite the increase in household debt between 1983 and 2007 there was no decline in the proportion of liquidity constrained households consumption volatility increased significantly over this period especially for liquidity constrained households indicating substantial welfare losses

pensions and wage premia i introduction despite the widespread acceptance of the theory of compensating differences empirical efforts to estimate the magnitude of these differences have met with only mixed success 1 with the exception of fatal risks economists have not been able to consistently find a significant relationship between wages and other job characteristics the failure to find consistent evidence on compensating differentials has been attributed to either poor measures of non wage characteristics or inadequate controls for worker productivity 2 studies by gunderson hyatt and pesando 1992 montgomery shaw and benedict 1992 and moore 1987 which have been able to explicitly address these issues have had greater success in finding significant compensating differentials in this paper we focus on an alternative explanation for the variation in estimated compensating differentials that the magnitude of the compensating differential varies systematically across different sectors in the labor market the theory of compensating differentials predicts that the implicit price or cost of providing a job attribute such as pensions will be a function of firm or industry technological differences and that the value attached to that attribute will also vary across workers depending on their tastes if workers and firms are not randomly assigned to sectors this will lead to systematic variations in the size of the estimated compensating differential across sectors or markets the result of this variation is that studies using different subsamples of the labor force will yield very different estimates of the size of the compensating differential the few studies that have addressed sources of heterogeneity in compensating differentials have concentrated on testing for individual differences in tastes for risk 3 in contrast our emphasis is on firm side differences in technologies or market power we estimate the compensating differential between annual pension accruals and wage rates and let this tradeoff vary by firm size and union status with corrections for selectivity bias the implicit cost of pensions and hence the size of the compensating differential may vary by finn size or union status for a number of reasons greater ability to spread fixed administrative costs across a large work force more difficulty monitoring worker effort or the presence of market power thus the cost of fringe benefits to the firm may be lower in large or unionized firms than in small nonunion firms we find empirical evidence supporting this view the estimated wage pension compensating differentials are smaller in unionized and large firms than in small nonunion firms the results from this paper are significant for several reasons 1 they provide evidence that compensating differentials vary across markets this evidence could account for some of the differences in estimates of tradeoffs across studies that have used different nonrandom samples 4 more importantly these sectoral differences serve as a reminder that the labor market is in fact a multitude of markets and that technological differences that vary across markets should be considered when addressing issues ranging from estimating the returns to human capital investment to the impact of the minimum wage 5 2 these results also deepen our knowledge of the relationship between pensions and wages a relationship that has important implications for the shape of workers wage earnings profiles or for the mechanisms for motivating workers and for the returns to human capital and for the distribution of income regarding the latter pensions are a large component of compensation and work by even and macpherson 1990 mccarthy and turner 1983 and moore 1987 suggests that coverage rates and returns are smaller for women and blacks our analysis suggests that an element of the differences could be sectoral choices

do liquidity constraints and interest rates matter for consumer behavior evidence from credit card data this paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply the data consist of a panel of thousands of individual credit card accounts from several different card issuers with associated credit bureau data we estimate both marginal propensities to consume mpcs out of liquidity and interest rate elasticities we also evaluate the ability of different models of consumption to rationalize our results distinguishing the permanent income hypothesis pih liquidity constraints precautionary saving and behavioral models we find that increases in credit limits generate an immediate and significant rise in debt counter to the pih the average mpc out of liquidity ddebt dlimit ranges between 10 14 the mpc is much larger for people starting near their limits consistent with binding liquidity constraints however the mpc is significant even for people starting well below their limit we show this response is consistent with buffer stock models of precautionary saving nonetheless there are other results that conventional models cannot easily explain e g why so many people are borrowing on their credit cards and simultaneously holding low yielding assets unlike most other studies we also find strong effects from changes in account specific interest rates the long run elasticity of debt to the interest rate is approximately 1 3 less than half of this elasticity represents balance shifting across cards with most reflecting net changes in total borrowing the elasticity is larger for decreases in interest rates than for increases which can explain the widespread use of temporary promotional rates the elasticity is smaller for people starting near their credit limits again consistent with liquidity constraints

the effect of unionism on fringe benefits this study analyzes the impact of unionism on fringes paid to production workers using data on individual establishments it compares fringe expenditures in establishments having the same level of compensation per hour and finds that unionism raises the share of compensation allotted to fringes particularly to pensions vacation pay and life accident and health insurance in addition since unionism also raises the straight time wage rate itself a prime determinant of expenditures on fringes unionism has a very sizeable impact on total fringe expenditures as well as on the fringe share of compensation the union fringe effect exceeds in percentage terms the union wage effect and is sufficiently large to suggest that standard union wage studies understate the union effect on total compensation the study also compares the fringe expenditures of production and non production workers within the same establishment controlling for within establishment pay policies the findings suggest that the pres

the spending and debt response to minimum wage hikes abstract immediately following a minimum wage hike household income rises on average by about 250 per quarter and spending by roughly 700 per quarter for households with minimum wage workers most of the spending response is caused by a small number of households who purchase vehicles furthermore we find that the high spending levels are financed through increases in collateralized debt our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock jel d12 d14 d91 j38

liquidity affects job choice evidence from teach for america can access to a few hundred dollars of liquidity affect the career choice of a recent college graduate in a three year field experiment with teach for america tfa a prestigious teacher placement program we randomly increase the financial packages offered to nearly 7 300 potential teachers who requested support for the transition into teaching the first two years of the experiment reveal that although most applicants do not respond to a marginal 600 of grants or loans those in the worst financial position respond by joining tfa at higher rates we continue the experiment into the third year and self replicate our results for the highest need applicants an extra 600 in loans 600 in grants and 1 200 in grants increase the likelihood of joining tfa by 12 2 11 4 and 17 1 percentage points or 20 0 18 7 and 28 1 respectively additional grant and loan dollars are equally effective suggesting a liquidity mechanism a follow up survey bolsters the liquidity story and also shows that those drawn into teaching would have otherwise worked in private sector firms

houses as atms mortgage refinancing and macroeconomic uncertainty we estimate a structural model of household liquidity management in the presence of long term mortgages households face counter cyclical idiosyncratic labor income uncertainty and borrowing constraints which aect optimal choices of leverage precautionary saving in liquid assets and illiquid home equity debt repayment mortgage renancing and default taking the observed historical path of house prices aggregate

fiscal policy with heterogeneous agents and incomplete markets i undertake a quantitative investigation into the short run effects of changes in the timing of proportional income taxes for model economies in which heterogeneous households face a borrowing constraint temporary tax changes are found to have large real effects in the benchmark model a temporary tax cut increases aggregate consumption on impact by around 29 cents for every dollar of tax revenue lost comparing the benchmark incomplete markets model to a complete markets economy income tax cuts provide a larger boost to consumption and a smaller investment stimulus when asset markets are incomplete copyright 2005 wiley blackwell

self control financial literacy the co holding puzzle we use uk survey data to analyze the puzzling co existence of high cost revolving consumer credit alongside low yield liquid savings in household balance sheets which we name the co holding puzzle approximately 12 of households in our sample co hold on average 3800 of revolving consumer credit on which they incur interest charges even though they could immediately pay down all this debt using their liquid assets co holders are typically more financially literate with above average income and education in most estimates co holding is also associated with impulsive spending behavior on the part of the household our results provide empirical support to theoretical models in which households co hold as a means of managing self control problems

interest rates and informational issues in the credit market experimental evidence from brazil summary this paper utilizes brazilian data to investigate interest rate sensitivity and informational issues associated with the credit demand of the middle income class in a large emerging economy this study s data were collected from an experiment in which credit offers with randomized interest rates were sent to recipients the results indicate that credit constraints and informational issues are important for both the lower middle class and higher middle class income groups interest rate reductions may be more effective for higher income groups

consumer default credit reporting and borrowing constraints why do negative credit events lead to long term borrowing constraints exploiting banking regulations in peru and utilizing currency movements we show that consumers who face a credit rating downgrade due to bad luck experience a three year reduction in financing consumers respond to the shock by paying down their most troubled loans but nonetheless end up more likely to exit the credit market for a set of borrowers who experience severe delinquency we find that the associated credit reporting downgrade itself accounts for 25 to 65 of their observed decline in borrowing at various horizons over the following several years

the impact of mortgage interest rate subsidies on household borrowing abstract the responsiveness of household borrowing to changes in the interest rate is a crucial parameter for assessing public policies aimed at promoting saving we estimate the effect on household borrowing of a reform of a program that subsidized interest rates on mortgages signed by medium and low income households the reform established a ceiling in the price of the house that could be financed with the program first we use triple difference estimators exploiting the fact that the reform should affect most the borrowing behavior of eligible individuals living in high price areas and estimate that the elasticity of the probability getting a loan to the interest rate lies between 2 8 and 1 3 second we document that after the reform the distribution of loan sizes became more concentrated at the discontinuity point of the budget constraint of eligible individuals both findings are consistent with a negative response of household borrowing to increases in interest rates

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

the failure of competition in the credit card market the bank credit card market containing 4 000 firms and lacking regulatory barriers casually appears to be a hospitable environment for the model of perfect competition nevertheless this article reports that credit card interest rates have been exceptionally sticky relative to the cost of funds moreover major credit card issuers have persistently earned from three to five times the ordinary rate of return in banking during the periods 1983 88 the failure of the competitive model appears to be partly attributable to consumers making credit card choices without taking account of the very high probability that they will pay interest on their outstanding balances copyright 1991 by american economic association

borrowing on the wrong credit card evidence from mexico abstract we establish new facts about the way consumers allocate debt among their credit cards using data for a representative sample of cardholders in mexico we find that relative prices are weak predictors of the allocation of debt purchases and payments consumers allocate a large fraction of their debt to high interest cards incurring a cost of 31 percent above the minimum using an experiment we find that consumers do not substitute in the price margin although they respond to salient temporary low interest offers we conclude that limited attention and mental accounting best rationalize our results and discuss implications for the market jel d14 g21 o12 o16

interest rate pass through mortgage rates household consumption and voluntary deleveraging abstract exploiting variation in the timing of resets of adjustable rate mortgages arms we find that a sizable decline in mortgage payments up to 50 percent induces a significant increase in c

strategic or nonstrategic the role of financial benefit in bankruptcy i introduction personal bankruptcy rates have increased at an annual rate of 3 9 since 1990 from about 718 thousand non business bankruptcies in 1990 to about 1 5 million in 2010 partly as a response to this increase the congress passed the bankruptcy abuse prevention and consumer protection act bapcpa of 2005 the largest overhaul of bankruptcy laws since 1980 although recent data are too sparse to determine the longer term effectiveness of the law we know that there was a spike in bankruptcy filings in 2005 just before the law took effect on october 17 2005 and a corresponding decline in 2006 since then bankruptcies have continued to rise reaching a level of about 1 5 million in 2010 the same level as in 2004 the bankruptcy rate has also begun to creep up to the earlier levels one of the major purposes of the new bankruptcy law was to cut down on abusive or fraudulent uses of the bankruptcy system or in other words strategic use of the law therefore it is important to understand the motivations of consumers who file for bankruptcy what constitutes strategic use of bankruptcy law and how widespread is its incidence in the literature there is no clear definition of what constitutes a strategic bankruptcy filing we shall consider strategic behavior to be a conscious decision to benefit from bankruptcy law to make this tractable consider a simple two period model of decision making in the first period consumers receive a noisy signal of experiencing a financial shock in the second period based on this signal consumers may update their probability of an adverse shock and choose their debt level in the second period the shock is realized and consumers decide whether to file for bankruptcy or not a strategic consumer is one who in the first period chooses her debt level after conditioning on the signal that is a strategic consumer takes on debt after accounting for the chance of filing for bankruptcy in other words a strategic consumer is one who is fully rational and takes decisions to maximize her benefit a nonstrategic consumer is one who chooses debt level without conditioning on the signal he plans to repay his debt in the absence of adverse events such a consumer is myopic and may be exhibiting rational inattention as described below consistent with this view we may distinguish between strategic and nonstrategic behavior by testing whether consumers make their debt and filing decision jointly or not strategic behavior is consistent with a joint decision whereas nonstrategic behavior is not in terms of empirical strategy this is implemented by testing whether financial benefit is endogenous to the filing decision or not our test is different from the one in the study by fay hurst and white 2002 henceforth fhw in that approach a positive relationship between filing for bankruptcy and financial benefit from filing ceteris paribus is taken as evidence of strategic behavior and a positive relationship between filing for bankruptcy and adverse events such as divorce health shocks employment shocks etc is taken as evidence of nonstrategic behavior using data from the panel study of income dynamics psid fhw show that financial benefit is positively and significantly related to the filing decision and after controlling for financial benefit adverse event variables do not affect the bankruptcy decision except for a marginally significant positive effect of divorce 1 this simple empirical relationship between bankruptcy filing and financial benefit does not consider more realistic relationships among financial benefit adverse events and strategic behavior for example financial benefit from filing may go up due to adverse events regardless of whether a consumer is trying to abuse bankruptcy law or not that is financial benefit goes up when a consumer consciously increases unsecured debts before filing consistent with strategic behavior and it also goes up when she uses unsecured debt e

restoring rational choice the challenge of consumer financial regulation abstract this lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively the lecture argu

job loss credit constraints and consumption growth we use direct evidence on credit constraints to study their importance for household consumption growth and for welfare we distentangle the direct effect on consumption growth of a currently binding credit constraint from the indirect effect of a potentially binding credit constraint which generates consumption risk our data is focused on job losers we find that less than 5 of job losers experience a binding credit constraint but for those that do they experience significant welfare losses and consumption growth is 24 higher than for the rest of the population however even among those who are currently unconstrained and who are able to borrow if needed consumption responds to transitory income

tax credits insurance and the use of medical care the personal income tax systems in canada the united states and elsewhere permit deductions or tax credits for out of pocket health care expenditures and private medical insurance premiums little is known about the effects of such tax measures on individual behaviour in contrast to the extensive research on the tax exemption for employer provided health insurance in this paper we exploit variation in the after tax cost of health expenditures under the tax law to estimate the tax price elasticity of demand for prescription drugs health insurance and other eligible expenditures we find evidence of moderate to large tax price elasticities compared with traditional point of service price elasticity estimates despite the apparent differences in the way tax subsidies are experienced by consumers in contrast we find no evidence the tax subsidy affects demand for health insurance on the intensive margin which we show is consistent with the theory of optimal self insurance we discuss the implications of our results for recent proposals to reform public and private health insurance systems jel classification i1 h2 credits d impot assurance et l utilisation des soins medicaux les systemes d impot sur le revenu des particuliers au canada aux etats unis et ailleurs permettent des deductions ou credits d impot pour les depenses directes en soins de sante assumees par les particuliers ou pour les primes d assurance privee on connait mal les effets de ces mesures fiscales sur le comportement des personnes par comparaison avec les resultats extensifs de la recherche sur les effets des exemptions fiscales pour l assurance sante fournie par les employeurs dans ce texte on utilise la variation dans le fardeau des depenses pour la sante apres impot selon les diverses juridictions pour evaluer l elasticite de la demande de medicaments d ordonnance de l assurance sante et d autres depenses eligibles en reponse a des differences de prix fiscaux on decouvre que l ordre de grandeur des elasticite se situe entre moderee et grande quand on les compare aux evaluations des elasticites traditionnelles de la demande aux points de service par rapport aux prix et ce malgre les differences apparentes dans les experiences de ces subventions fiscales pour les consommateurs d autre part on ne trouve pas de support pour l hypothese que les subventions fiscales affectent la demande d assurance santea la marge intensive ce qui concorde bien avec ce que nous enseigne la theorie de l auto assurance optimale on discute les implications de ces resultats pour certaines reformes recentes proposees aux systemes d assurance sante prives et publics

cost structure customer profitability and retention implications of self service distribution channels evidence from customer behavior in an online banking channel this paper uses the context of online banking to investigate the consequences of using self service distribution channels to alter customer interactions with the firm using a sample of retail banking customers observed over a 30 month period at a large u s bank we test whether changes in service consumption cost to serve and customer profitability are associated with the adoption of online banking we find that customer adoption of online banking is associated with 1 substitution primarily from incrementally more costly self service delivery channels automated teller machine and voice response unit 2 augmentation of service consumption in more costly service delivery channels branch and call center 3 a substantial increase in total transaction volume 4 an increase in estimated average cost to serve resulting from the combination of points 1 3 and 5 a reduction in short term customer profitability however we find that use of the online banking channel is associated with higher customer retention rates over one two and three year horizons the documented relationship between the use of online banking and customer retention remains positive even after controlling for self selection into the online channel we also find evidence that future market shares for our sample firm are systematically higher in markets with high contemporaneous utilization rates for the online banking channel this finding holds even after controlling for contemporaneous market share suggesting it is not simply the result of increased market power leading to the acquisition of online banking customers