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The real effects of financial technology: Marketplace lending and personal bankruptcy

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  • Danisewicz, Piotr
  • Elard, Ilaf

Abstract

We examine how financial technology affects households in terms of personal bankruptcy by leveraging exogenous variation in marketplace credit supply to Connecticut and New York residents. We document a persistent rise in bankruptcies in the affected states following sharp decreases in marketplace lending, particularly among low-income households and in areas where marketplace loans for financing medical bills are severely rationed. Borrowers’ indebtedness or local economic conditions do not explain the results. The supply of other consumer credit by banks and finance companies remains unaffected, suggesting that the observed increase in bankruptcies arises principally from reversing access to marketplace credit.

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  • Danisewicz, Piotr & Elard, Ilaf, 2023. "The real effects of financial technology: Marketplace lending and personal bankruptcy," Journal of Banking & Finance, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:jbfina:v:155:y:2023:i:c:s037842662300184x
    DOI: 10.1016/j.jbankfin.2023.106986
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    More about this item

    Keywords

    Credit supply; Marketplace lending; Alternative finance; Financial technology; Bankruptcy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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