Consumption Smoothing or Consumption Binging? The effects of government-led consumer credit expansion in Brazil
Brazil initiated a major credit expansion program through government banks in 2011. The program primarily targeted public sector workers with offers of payroll-backed loans. Using individual-level administrative data we find that the program led to a 15 percentage point rise in debt to initial income for public sector workers. We develop a new method for estimating workers' expected income growth, and show that ''consumption smoothing'' cannot explain the rise in consumer borrowing. Instead, the evidence supports ''consumption binging'': less financially sophisticated workers borrowed more at high real interest rates, and experienced both higher consumption volatility and lower average consumption.
Published Versions
Gabriel Garber & Atif Mian & Jacopo Ponticelli & Amir Sufi, 2024. "Consumption smoothing or consumption binging? The effects of government-led consumer credit expansion in Brazil," Journal of Financial Economics, vol 156. citation courtesy of 
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