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  1. What drives the demand for high-cost consumption loans?
    Author: Hansen, Emil Toft
    Published: [2022]
    Publisher:  CEBI, Department of Economics, University of Copenhagen, Copenhagen

    This paper utilizes high-quality transaction data from the largest bank in Denmark to study what drives the demand for high-cost consumption loans. I investigate the extent to which adverse events drive loan demand, or if it is more likely to be... more

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    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 814
    Inter-library loan:
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    This paper utilizes high-quality transaction data from the largest bank in Denmark to study what drives the demand for high-cost consumption loans. I investigate the extent to which adverse events drive loan demand, or if it is more likely to be explained by borrowers' personality traits. I find no evidence suggesting that borrowers suffer expenditure, health or social shocks at the time of borrowing. There are indications that some borrowers suffer income shocks, but the magnitude is too modest for this to be an important determinant of aggregate loan demand. Instead, I find evidence pointing towards a dominant role for borrowers' personality traits in explaining loan demand. Using paycheck sensitivity as a proxy, I show that high-cost borrowers appear to be significantly more present-biased than other consumers. I also document that high-cost borrowers are more prone to temptation spending as they spend much more on gambling than other consumers, both leading up to and when borrowing for the first time. Further, I find that high-cost borrowers persistently spend more than they earn and that this gap widens further as they approach the time of their first high-cost loan. Lastly, I document a large increase in non-essential spending around the time of borrowing. Taken together, the results indicate that high-cost borrowers have self-control problems and that high-cost loans are likely used to finance impulse spending or function as a way to prolong a credit-financed spell of overconsumption.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/268911
    Series: CEBI working paper series ; 22, 07
    Subjects: High-Cost Credit; Payday Loans; Consumption Loans; Household Finance; Consumer Behaviour; Transaction Data
    Scope: 1 Online-Ressource (circa 51 Seiten), Illustrationen
  2. Personality-augmented MPC
    linking survey and transaction data to explain MPC heterogeneity by Big Five personality traits
    Author: Nemeczek, Fabian; Radermacher, Jan
    Published: [2022]
    Publisher:  Leibniz Institute for Financial Research SAFE, Sustainable Architecture for Finance in Europe, [Frankfurt am Main]

    We investigate the link between Big Five personality traits and the marginal propensity to consume (MPC) for users of a German financial account aggregator app. We use 1,700 survey responses and transaction data of 56,000 app users to assess whether... more

    Access:
    Resolving-System (kostenfrei)

    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 431
    Inter-library loan:
    No inter-library loan

     

    We investigate the link between Big Five personality traits and the marginal propensity to consume (MPC) for users of a German financial account aggregator app. We use 1,700 survey responses and transaction data of 56,000 app users to assess whether Big Five personality traits help explain MPC heterogeneity. We find that extraversion corresponds to an increase in consumption whereas agreeableness and neuroticism correspond to a decrease in consumption. We test this with trust and risk preferences and find that risk indicates more explanatory power in consumption response than the Big Five. Our findings help policy makers target individuals more efficiently.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Other identifier:
    hdl: 10419/253381
    Series: SAFE working paper ; no. 348 (April 2022)
    Subjects: Marginal Propensity to Consume; Big Five Personality; Survey Data; Transaction Data
    Scope: 1 Online-Ressource (circa 67 Seiten), Illustrationen