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dc.contributor.authorBICAKOVA, Alena
dc.date.accessioned2007-03-20T10:32:44Z
dc.date.available2007-03-20T10:32:44Z
dc.date.issued2007
dc.identifier.issn1725-6704
dc.identifier.urihttps://hdl.handle.net/1814/6745
dc.description.abstractDefault rates on instalment loans vary with type of the good purchased. Using an Italian dataset of instalment loans between 1995-1999, we first show that the variation persists even after controlling for contract and individual-specific characteristics, and for the potential selection bias due to credit rationing. We explore whether the residual variation in the default rates across the different types of goods is due to unobserved individual heterogeneity (selection effect) or due to the effect of the specific characteristics of the good (good effect). We claim that the two effects may be interpreted as adverse selection and moral hazard. We exploit the data on multiple contracts per individual to disentangle the two effects, and find that most of the variation is explained by the selection effect. Individuals who buy motorcycles on credit are more likely to default on any loan, while those buying kitchen appliances, furniture and computers are more likely to repay, compared to average. We conclude that there is asymmetric information in the consumer credit market, mostly in the form of adverse selection.en
dc.format.extent472889 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.publisherEuropean University Institute
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2007/02en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectConsumer Crediten
dc.subjectDefaulten
dc.subjectAdverse Selectionen
dc.subjectMoral Hazarden
dc.subjectD12en
dc.subjectD14en
dc.subjectD82en
dc.titleDoes the Good Matter? Evidence on Moral Hazard and Adverse Selection from Consumer Credit Marketen
dc.typeWorking Paperen
dc.neeo.contributorBICAKOVA|Alena|aut|
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