High‐Cost Credit and Consumption Smoothing. This paper ended up being previously circulated as “For Better and for even worse? Ramifications of Usage Of High‐Cost Credit Rating.”

High‐Cost Credit and Consumption Smoothing. This paper ended up being previously circulated as “For Better and for even worse? Ramifications of Usage Of High‐Cost Credit Rating.”

We thank the editor, Robert DeYoung, an referee that is anonymous Todd Gormley, Mark Jenkins, Paul Landefeld, Donald Morgan, Nick Roussanov, Luke Taylor, and Jeremy Tobacman for helpful responses, in addition to seminar participants in the Wharton class, the you can look here GW/FRB/GFLEC Financial Literacy Seminar as well as the Consumer Expenditure Survey Microdata Workshop. I will be grateful to Jimmy Lee, Ryan Pfirrmann‐Powell, Geoffrey Paulin, Arcenis Rojas, among others when you look at the Division associated with the Consumer Expenditure Survey during the Bureau of Labor Statistics for support accessing the Consumer that is confidential Expenditure files, and I also have always been grateful to Paul Amos regarding the Wharton GIS lab for help with GIS. The Jay H. Baker Retailing Center during the Wharton School provided ample support that is financial the task before the writer's work because of the Federal Reserve.The analysis and conclusions expressed in this paper are the ones associated with the writer and don't fundamentally mirror the views regarding the Board of Governors of this Federal Reserve System, its users, or its staff. This research ended up being carried out with restricted use of Bureau of Labor Statistics (BLS) information. The views right here try not to fundamentally mirror the views for the BLS.


In this paper, We reveal that high‐cost credit helps households smooth usage after durations of short-term distress that is financial. After experiencing distress—that is, extreme climate events—I realize that access to high‐cost payday lending mitigates declines in general investing and nondurable products investing generally. The outcome are particularly concentrated among households with a greater propensity to utilize credit that is payday that have actually restricted alternatives: low income households, households with not as much as a college degree, and households with lower levels of preserving. These outcomes highlight the consumption‐smoothing part that high‐cost credit plays for households with restricted usage of other styles of credit.

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