Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 6, 2022 erstellt
Description:
Using data from the largest online lender in the United States, I document advantageous selection in loan amount. By exploiting a natural experiment within the platform, I show that borrowers who select larger loans are less likely to default. This selection is driven by households who live in states with bankruptcyfriendly laws, where borrowers’ default costs are lower. Standard models where borrowers maximize their utility cannot rationalize my results and make the opposite prediction. In a simple model of household borrowing, I show that my results canbe explained by the fact that borrowers facing higher loan prices search more intensively for cheaper loans. This effect is stronger for the safest borrowers, as they enjoy the greatest benefits from switching