The Impact of Loan Modifications on Repayment, Bankruptcy, and Labor Supply: Evidence from a Randomized Experiment
The Impact of Loan Modifications on Repayment, Bankruptcy, and Labor Supply: Evidence from a Randomized Experiment
7 July, 2020 •Similar Articles
Reciprocity and exclusion in informal financial institutions: An experimental study of rotating savings and credit associations
Group cooperation is fundamental to human society. The public goods game is often used to describe the difficulty of group cooperation. However, th...
Harnessing Emotional Connections to Improve Financial Decisions
This paper exploits the emotional connections and viewer attentiveness of mainstream media to evaluate the economic impact of financial education m...
Deposit Collectors
Informal lending and savings institutions exist around the world, and often include regular door-to-door deposit collection of cash. Some banks hav...
This paper uses a randomized experiment and administrative tax and bankruptcy records to estimate the impact of loan modifications on subsequent outcomes. A large non-profit credit counselling organization and eleven unsecured creditors offered lower interest rates and longer repayment periods to a random subset of 80,000 distressed borrowers. Borrowers offered a lower interest rate were more likely to repay their debts and less likely to file for bankruptcy protection. For the most heavily indebted borrowers, lower interest rates also increased the probability of being employed. In contrast, there was little impact of a longer repayment period on debt repayment, bankruptcy, or employment.