Florian W. Chávez Juárez - Economics - Papers


Florian Wendelspiess Chávez Juárez



Stay informed about this paper

By providing your e-mail address, I will keep you informed about new versions of this paper or an eventual publication.

Your e-Mail address: send
This website uses cookies. By using the website, you accept the use of cookies. Ok, I accept cookies  NO, I don't accept cookies

Detailed view of paper

The credit behavior of households - a behavioral approach, Second and completely revised draft. 1/2015. Status: Revising.

The access to credit is generally seen as an important ingredient for development. However, over the last years reports on families contracting excessive debt and falling into credit traps have also increased. In this paper I develop a model of family credit behavior based on insights from behavioral economics. I particularly consider phenomena like keeping-up-with-the-Joneses, a limited time horizon, gain-loss-asymmetry and over-confidence. The model coherently reproduces the level and the distribution of debt over for all socioeconomic groups. The results suggest that the use of a reference-group dependent utility and the precise definition of the reference group are crucial elements in explaining the debt levels of the different socio-economic groups. A policy simulation shows that reducing the amount of available credit (ceiling) might have beneficial effects on consumption and consumption inequality. In this respect, the findings contradict the idea that access to credit is positive for families in all situations.

externalPaper on SSRN