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The Brazilian Payroll Lending Experiment

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Author Info

  • Christiano A. Coelho

    (IBMEC-RJ)

  • João M.P. De Mello

    (Departamento de Economia, PUC-Rio, and CNPq)

  • Bruno Funchal

    (FUCAPE Business School and CNPq)

Abstract

In December 2003, the Brazilian Congress passed a law that led to a natural personal lending experiment. The law allows banks to offer loans with repayment through automatic payroll deduction, which, in effect, turns future income into collateral. We estimate the impact of the new law using auto loans as a control group. The law has caused a reduction in interest rates and an increase in the volume of personal credit. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 4 (November)
Pages: 925-934

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Handle: RePEc:tpr:restat:v:94:y:2012:i:4:p:925-934

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Related research

Keywords: payroll; loans; credit markets; collateral; difference-in-differences; Brazil;

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References

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  1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series, The World Bank 1083, The World Bank.
  2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
  3. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
  4. Ana Carla A. Costa & João M. P. De Mello, 2008. "Judicial Risk and Credit Market Performance: Micro Evidence from Brazilian Payroll Loans," NBER Chapters, National Bureau of Economic Research, Inc, in: Financial Markets Volatility and Performance in Emerging Markets, pages 155-184 National Bureau of Economic Research, Inc.
  5. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 26(2), pages 646-79, June.
  6. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile, Central Bank of Chile 56, Central Bank of Chile.
  7. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, Elsevier, vol. 84(2), pages 299-329, May.
  8. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(2), pages 239-280, April.
  9. repec:fth:wobaco:1083 is not listed on IDEAS
  10. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(3), pages 488-511, June.
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Cited by:
  1. Aloisio Araujo & Bruno Funchal, 2013. "How much should debtors be punished in case of default?," Fucape Working Papers, Fucape Business School 41, Fucape Business School.
  2. Juliano J. Assunção & Efraim Benmelech & Fernando S. S. Silva, 2012. "Repossession and the Democratization of Credit," NBER Working Papers 17858, National Bureau of Economic Research, Inc.
  3. Guilherme Lichand & Rodrigo R. Soares, 2011. "Access to justice and entrepreneurship: evidence from Brazil’s Special Civil Tribunals," Textos para discussão, Department of Economics PUC-Rio (Brazil) 591, Department of Economics PUC-Rio (Brazil).
  4. Patrice Robitaille, 2011. "Liquidity and reserve requirements in Brazil," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 1021, Board of Governors of the Federal Reserve System (U.S.).

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