Optimal Loan Loss Provisions and Welfare

Payday Loan Rollovers and Consumer Welfare

Using payday-lender administrative data matched to borrower credit attributes from a national credit bureau, I find that borrowers who engage in protracted refinancing (“rollover”) activity have better financial outcomes (measured by changes in credit scores) than consumers whose borrowing is limited to shorter periods. These results are robust to an alternative definition of a “rollover” that ...

Optimal loan size and mortgage rationing

Introduction Residential mortgage loans are the major instrument of housing finance. A mortgage arrangement is equivalent to an exchange of a loan today for a stream of future payments. In general, a household or investor will borrow whenever the marginal cost of borrowing is less than the marginal utility or benefit derived from the asset. Mortgage loans are secured by the real property, and p...

ACCOUNTING WORKSHOP “Using Loan Loss Indicators by Loan Type to Sharpen the Evaluation of the Determinants and Implications of Banks’ Loan Loss Accruals”

We show that the determinants and economic implications of the primary loan loss indicators reported in financial reports—non-performing loans (NPL), the allowance and provision for loan losses (ALL and PLL), and net loan charge-offs (NLCO)—vary dramatically across real estate, commercial, and consumer loan types, because these types differ in their homogeneity and collateralization and thus in...

Optimal tariffs, retaliation and the welfare loss from tariff wars in the Melitz model

Optimal Welfare-to-Work Programs

A Welfare-to-Work (WTW) program is a scheme of government expenditures on “passive” (unemployment compensation, social assistance) and “active” (job search monitoring, training, wage subsidies) labor market policies targeted to the unemployed. This paper studies the optimal WTW program as a recursive contract between a cost-minimizing government and a worker whose human capital depreciates duri...