Modeling the Revolving Revolution: The Role of IT Reconsidered
نویسندگان
چکیده
Credit card default losses increased dramatically in the 80s and 90s, from 3% to over 5% of outstanding debt. We explore whether technological progress in debt collection is behind this change by developing a new theory featuring costly state verification with signals. We motivate our approach by the predominance of informal bankruptcy in the credit card market, which necessitates the costly involvement of the lending industry to enforce repayment. We show that the presence of enforcement costs, when combined with the rate of technological progress suggested by the available evidence, rationalizes the observed shift in the risk composition of debt. JEL: E21, D91, G20
منابع مشابه
Online Appendix Modeling the Revolving Revolution: The Role of IT Reconsidered [not intended for publication]
This Appendix contains an overview of debt collection technologies in the U.S. and its recent evolution. In the first section we summarize how debt is collected in the U.S. Section 2 focuses on collection technology and its recent evolution. The last section describes the data sources used in the analysis. 1 Overview of the Debt Collection Process in the US We briefly describe the debt collecti...
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