- Expanding Financial Access Via Credit Cards: Evidence from Mexico
with Sara G. Castellanos, Enrique Seira, Aprajit Mahajan, 2020Reject & Resubmit, Review of Economic StudiesSummary at povertyactionlab.org,
Credit card debt is increasingly common among poor and inexperienced borrowers — thus de facto a financial inclusion product. However, it remains relatively under-studied. We use detailed card level data and a product that accounted for 15% of all first-time formal loans in Mexico and show that default rates are high and ex-ante unpredictable for new borrowers — suggesting an important role for ex-post contract terms in limiting risk. However, using a large nation-wide experiment we find that default is unresponsive to minimum payment increases, a commonly proposed policy remedy. We provide evidence that the zero result is driven by the offsetting effects of tightened liquidity constraints and lower debt burdens. Surprisingly, we also find muted default responses to large experimental changes in interest rates — suggesting a limited role for ex-post moral hazard in our context. Finally, we use job displacements to document large effects of unemployment on default, highlighting the centrality of idiosyncratic shocks as a barrier to the expansion of formal credit among poorer populations.
- Should The Government Sell You Goods? Evidence from the Milk Market in Mexico
with Enrique Seira, 2020
We study a nationwide welfare program in Mexico in which the government, in an effort to eliminate hunger, sells milk to households at subsidized rates via a network of thousands of specialized "ration stores." Such direct provision programs, which exist in many countries, often appear puzzling to economists, as it seems unlikely that the government would have any comparative advantage relative to the private market in procuring and distributing milk. To understand direct provision, we formulate and estimate an equilibrium model of the milk market, and use it to compare this program with natural (budget-neutral) alternatives such as milk vouchers or unrestricted cash transfers. Using rich household-level panel data and the variation generated by the staggered entry of new government stores, we show that market power by private milk suppliers is an important concern, and that government-sold and privately-sold milk are close (though imperfect) substitutes. Consequently, direct provision plays an important role in the milk market in Mexico by disciplining private-milk prices. Indeed, our results suggest that, in the absence of government milk, private market prices would be 3% higher, and that direct provision generates consumer welfare gains of 4% relative to milk vouchers and 2% relative to unrestricted cash transfers.
- Should We Treat Data as Labor? Moving Beyond “Free”
with Imanol Arrieta Ibarra, Len Goff, Jaron Lanier, E. Glen Weyl, 2018AEA Papers and Proceedings
In the digital economy, user data is typically treated as capital created by corporations observing willing individuals. This neglects users' role in creating data, reducing incentives for users, distributing the gains from the data economy unequally and stoking fears of automation. Instead treating data (at least partially) as labor could help resolve these issues and restore a functioning market for user contributions, but may run against the near-term interests of dominant data monopsonists who have benefited from data being treated as ''free''. Countervailing power, in the form of competition, a data labor movement and/or thoughtful regulation could help restore balance.
Research in Progress
(send me an email for an early draft / slides / thoughts / questions)
- An Empirical Study of the Value of Data: Evidence from Uber
with Imanol Arrieta Ibarra, Tiago Caruso, E. Glen Weyl, 2020
- Currency Depreciations and Savings Behavior: Evidence from Household Deposits in Armenia
with Joshua Kim, Aleksandr Shirkhanyan, 2020
- And Some, I Assume, Are Good People: Drivers of Mexican Migration to the US
with Eduardo Laguna Müggenburg, 2020