Abstract: We study the redistributive effects of reward programs in consumer credit markets, where salient benefits often mask shrouded costs. Using granular information on over 200 million U.S. credit cards and comparing reward cards with otherwise similar non-reward cards, we find that sophisticated individuals profit at the expense of naïve consumers regardless of their income. To probe the underlying mechanisms, we exploit bank-initiated credit limit increases and show that rewards stimulate spending across all consumers but leave only naïve individuals with higher unpaid balances. Naïve consumers with multiple cards also follow a suboptimal balance-matching heuristic when repaying, incurring unnecessary costs. Banks incentivize reward cards by offering lower APRs than on non-reward cards, profiting from naïve consumers through interest and fee charges and from sophisticated individuals through interchange income. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas.

(Working Paper - February 2025) 

Coverage: Economist, New York Times, Washington Post, Financial Times, Wall Street Journal, Politico, Fortune, Bloomberg (Wealth Economics), Bloomberg (Opinion), Vox, Forbes, CEPR VoxTalks (podcast), CNBC (with video), Business Insider, Marginal Revolution, Quartz, Motley Fool, View from the Wing, The Lever, Retail Industry Leaders Association

Conference and Seminar Presentations: WFA Meeting 2023 (US), SFS Cavalcade 2023 (US), FIRS Conference 2022 (Hungary), 16th Swiss Winter Conference on Financial Intermediation (Switzerland), 2022 University of British Columbia Winter Finance Conference (Canada), IMF (US), Federal Reserve Board (US), 15th Queen Mary Behavioral Finance Working Group Conference (UK), 5th Bristol Banking Workshop (UK), European University Institute (Italy), 37th European Economic Association Meeting (Italy), 4rd VU Amsterdam Conference on Research in Behavioral Finance (Netherlands), 2022 IWFSAS (UK), Nova SBE (Portugal), George Washington University (US), World Bank (US), 4th Philadelphia Fed CFI Workshop on Payments, Lending, and Innovations in Consumer Finance (US), Bank of Portugal (Portugal), University of Luxembourg (Luxembourg), 3rd Georgia State CEAR/HEC Montreal RSI Household Finance Workshop (Canada), Federal Reserve/George Washington University Financial Literacy Seminar (US)

Abstract: To safeguard its technological leadership, the U.S. has restricted domestic suppliers from exporting specific cutting-edge technologies to selected Chinese firms. Domestic firms affected by these export controls halt sales to Chinese customers, as intended, but struggle to establish new relations with alternative customers domestically or in politically aligned regions. As a result, domestic suppliers experience a $130 billion decline in market capitalization, along with reductions in profitability, employment, and bank lending. We also show how Chinese firms strategically respond to export controls. Overall, export controls impose significant costs on domestic firms producing the very technologies these policies intend to protect.

(Working Paper - February 2025)

Coverage:  New York Times, NY Fed Liberty Street Economics, CNN, Bloomberg, Barron's, Marginal Revolution, CSIS

Conference and Seminar Presentations: 2024 Columbia University Global Capital Allocation Project Annual Conference (US), 2023 Kiel Institute and CEPR Joint Conference (Germany), CEPR–Bocconi Geoeconomics Junior Workshop (Italy), Center for Strategic and International Studies Geoeconomic Meeting (US), European Central Bank (Germany), and University of Connecticut (US)

Abstract:  We examine the impact of a personal finance course on financial behaviors and attitudes among adults in Portugal through a randomized controlled trial involving over 5,000 participants. We find that treated individuals exhibit significantly higher financial knowledge than the control group, with stronger effects among women, financially excluded individuals, those experiencing financial hardship, and participants with lower baseline financial knowledge. The program also improves attitudes and confidence toward money management and financial planning, leading to more informed financial behaviors. Treated individuals are more likely to reduce expenses to meet financial goals, save and invest, and allocate funds to higher-risk, higher-return assets such as bonds, stocks, and ETFs. Our findings highlight the effectiveness of structured, targeted interventions closing financial literacy gaps, even in relatively affluent populations within high-income countries.  Future work will explore both the short-term and long-term effects in more depth, leveraging detailed administrative data on credit, income, consumption, and employment decisions.

(RCT in Progress - AEA RCT Registry)