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Indebtedness and labor risk sorting across consumer lender types: evidence from Chile

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  • Carlos Madeira

Abstract

Economic theory predicts that borrowers sort themselves in different loan contracts according to their risk and preferences, with some consumers becoming credit constrained and without access to debt. As a middle-income country, Chile has a consumer loan market with many lender types (Banks, Retail Stores, Unions, Other Lenders such as car dealers), providing a perfect setting for testing borrowerlender sorting theory. Using survey data, I show that banks have the borrowers of highest income and education and the lowest unemployment rates, while households with no access to debt have the lowest income and education and the highest unemployment risk.

Suggested Citation

  • Carlos Madeira, 2024. "Indebtedness and labor risk sorting across consumer lender types: evidence from Chile," Working Papers Central Bank of Chile 1004, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:1004
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_1004.pdf
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    References listed on IDEAS

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    1. Madeira, Carlos, 2023. "The evolution of consumption inequality and risk-insurance in Chile," Emerging Markets Review, Elsevier, vol. 54(C).
    2. Carlos Madeira, 2023. "Use of Financial Instruments Among the Chilean Households," Lecture Notes in Operations Research, in: Pascal Alphonse & Karima Bouaiss & Pascal Grandin & Constantin Zopounidis (ed.), Essays on Financial Analytics, pages 63-86, Springer.
    3. Carlos Madeira, 2015. "Motivaciones del Endeudamiento en las Familias Chilenas," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 18(1), pages 90-106, April.
    4. Liran Einav & Mark Jenkins & Jonathan Levin, 2012. "Contract Pricing in Consumer Credit Markets," Econometrica, Econometric Society, vol. 80(4), pages 1387-1432, July.
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