Job Market Paper

Removing the Fine Print: Standardization, Disclosure, and Consumer Outcomes
(with G. Iberti and S. Truffa)

Consumers face a choice when evaluating financial contracts: study the fine print and incur a cognitive cost or ignore it and risk costly surprises in future. We use a pair of policy changes in Chile to contrast two measures to protect consumers from fine print: the first improves disclosure and the second standardizes and regulates contract features. With administrative data from the banking regulator on consumer loans, we use a regression discontinuity design to estimate the causal effects of these regimes. Consumers offered standardized contracts experienced 40% (14.4 percentage points) less delinquency. Using a difference-in-differences design, we find that sophisticated borrowers are helped most by increased disclosure, while unsophisticated borrowers benefit more from product standardization. Additionally, we show that only sophisticated borrowers---who benefit from the informational disclosure treatment---leave less “money on the table”. We contextualize these results in a stylized model that predicts that financially sophisticated will benefit from disclosure while unsophisticated borrowers will benefit from standardization based on differentials in the cost of studying.

Working Papers

Estimating The Information Component in Switching Costs: A Structural Approach
(with G. Iberti and S. Truffa)

We exploit a unique natural experiment to structurally estimate the information frictions associated with switching costs. Specically, we study a Chilean policy that simplied and standardized the presentation of loan characteristics in contracts and quotes. Using administrative data from the banking regulator, we exploit how this policy change affected the price-sensitivity in consumer decisions to identify the reduction in information frictions. We then incorporate this estimate into a dynamic structural model to explore the link between reduced informational frictions and welfare in long-term market equilibrium. We find that after the policy information frictions fell around 10 percent, which translated into an interest reduction of 180 basis points. We estimate a welfare improvement for consumers of 15 percent in the long run.

Works in Progress

More Effective Delivery of Financial Education (with E. Berwat and S. Truffa)

Proximity and Payday Loans (with S. Raina and B. Scholnick)

Balance Saliency and Credit Outcomes (with T. Odean)

Private Loan Securitization and Education

The Effect of Competition on University Tuition