NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Consumer Credit: Too Much or Too Little (or Just Right)?

Jonathan Zinman

NBER Working Paper No. 19682
Issued in November 2013
NBER Program(s):DEV, EFG, LE

The intersection of research and policy on consumer credit often has a Goldilocks feel. Some researchers and policymakers posit that consumer credit markets produce too much credit. Other researchers and policymakers posit that markets produce too little credit. I review theories and evidence on inefficient consumer credit supply. For each of eight classes of theories I sketch some of the leading models and summarize any convincing empirical tests of those models. I also discuss more "circumstantial" evidence that does not map tightly into a particular model but has the potential to shed light on, or obscure, answers to key questions. Overall there is a lack of convincing evidence on whether markets err, and in which direction. We do not yet understand whether and under what conditions markets over-supply or under-supply credit, much less why.

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Document Object Identifier (DOI): 10.3386/w19682

Published: Consumer Credit: Too Much or Too Little (or Just Right)? Jonathan Zinman The Journal of Legal Studies Vol. 43, No. S2, Benefit-Cost Analysis of Financial Regulation: A Conference Funded by the Alfred P. Sloan Foundation and Supported by the Coase-Sandor Institute for Law and Economics (June 2014), pp. S209-S237

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