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The Expansion of Peer-to-Peer Lending

Author

Listed:
  • Olena Havrylchyk

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Carlotta Mariotto

    (European Commission [Brussels], Oxera Consulting, Milan, Italy)

  • Talal Rahim

    (ESCP Business School [Madrid])

  • Marianne Verdier

    (CRED - Centre de Recherche en Economie et Droit - UP2 - Université Panthéon-Assas, CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

We use data from the two leading US platforms, Prosper and Lending Club, to explore the drivers of the growing consumer demand for peer-to-peer (P2P) credit. Despite the online nature of new entrants, we rely on the spatial autoregressive model because spatial effects play an important role. Our findings suggest that the initial growth of P2P lending was spurred by the global financial crisis, but its growth after 2011 occurred in counties that were underserved by bank branches. The growth of P2P lending is slower in counties with high bank concentration and this factor is the most robust, stable over time and economically important in our study. Counties with lower population density, lower share of educated and young people experience lower growth of P2P lending, consistent with the hypothesis that learning costs deter the entry of new entrants.

Suggested Citation

  • Olena Havrylchyk & Carlotta Mariotto & Talal Rahim & Marianne Verdier, 2021. "The Expansion of Peer-to-Peer Lending," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04120408, HAL.
    • Handle: RePEc:hal:cesptp:hal-04120408
    DOI: 10.1515/rne-2020-0033
    as

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