Filipe Correia

Publications

Research

Consumer Credit Without Collateral, Regulation, or Intermediaries with António Martins and Anthony Waikel 

[Paper] Under Review

Using novel data from an online informal credit market, we investigate how consumer credit unfolds without a financial system. We find borrowers display high rates of default and face high credit prices. A minority of consistently successful lenders gain a disproportionately large and profitable market share, while the average lender realizes losses. High-skill lenders achieve better loan outcomes and provide more lenient loan terms. Loans are more likely to be funded and repaid when acquiring information about borrowers is easier for lenders. These findings highlight the role of intermediaries in consumer credit: they bring skill and internalize information acquisition. 

The Online Payday Loan Premium with Peter Han and Jialan Wang

[NEW Version Coming Soon!!]

Using data from a subprime credit bureau with nationwide coverage in the United States, we investigate the potential for online technology to lower fixed costs and increase lending efficiency in the expensive payday loan market. We find that prices for online loans are about 100\% APR higher than storefront loans. Customers with both types of loans are much more likely to default on online loans, and pay higher prices on them. This premium is not explained by loan or customer characteristics, differences in pricing models, or traditional measures of credit risk. While part of the online payday loan premium seems to be associated with default rates that are double that for storefront loans, we show that information asymmetry explains this equilibrium.

Cash Transfer Timing and the Use of Credit: How Liquidity Impacts Consumption Smoothing with Marco Bonomo and Felipe Tomkowski

[NEW Version Coming Soon!!]

Government benefit payments are often paid according to a pre-determined schedule that may or may not align with beneficiaries' financial needs. Exploiting a fixed cash transfer payment schedule, we studied the impact of within-month variation in the benefit payment day on credit intake and delinquency of low-income households. Our findings reveal that households rely more on credit to smooth consumption when facing a later benefit day, even with predictable schedules. In particular, they often resort to consumption credit to meet their needs and present higher default rates. We develop an econometric procedure to allow us to pin down two different mechanisms for these results. First, consumers demand more credit when expenses arise earlier than receivables. Secondly, as they are paid systematically later, we show that they obtain less credit. The two mechanisms are challenging to measure as they happen to move in opposite directions, and we contribute by providing a feasible identification of both.

Is Corporate Credit Risk Propagated to Employees? with Gustavo Cortes and Thiago Christiano Silva  

[Paper]

As rising household debt became a widespread global phenomenon, understanding the sources of consumer credit risk has been crucial for financial and macroeconomic stability. We analyze employer-employee relationships from the perspective of banks to study the financial linkages between a firms’ credit conditions and their employees’ credit outcomes. We combine administrative credit registry data with the universe of labor contracts in Brazil to investigate if credit risk spills over from firms to their employees. We find that employees of credit-rating-downgraded companies have access to 20% less and 10% more expensive credit, compared to similar employees of non-downgraded firms. Downgraded-firm workers are also 5 p.p. more likely to default on loans compared to employees from unaffected publicly-listed firms. These negative financial effects have real consequences and are larger for non-executive personnel, who cut 9% on consumption following the downgrade. Finally, we document that banks price an employee’s risk of unemployment after an employer’s downgrade since these effects are one order of magnitude stronger for “payroll loans,” i.e., credit taken against a worker’s salary.

Work in Progress

The Impossibility of Saving by Spending with Bianca Putz

Working Papers

Portugal’s Memorandum: Higher Understanding, Lower Drug Prices, with Pedro Pita Barros

Consumer Spending in the Coronavirus Outbreak, with Jialan Wang

The Value of a Heartbeat: Retirement Choices and Cardiovascular Health, with Sara R. Machado

In the Media

CNBC's Getting paid Wednesdays instead of Fridays makes me feel like I earn more.

My Q&A with WalletHub on secured credit cards.