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

Author

Listed:
  • Gabriel Garber
  • Atif R. Mian
  • Jacopo Ponticelli
  • Amir Sufi
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.

Suggested Citation

  • Gabriel Garber & Atif R. Mian & Jacopo Ponticelli & Amir Sufi, 2021. "Consumption Smoothing or Consumption Binging? The effects of government-led consumer credit expansion in Brazil," NBER Working Papers 29386, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29386
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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