Description

Economic theory predicts that borrowers sort themselves in different loan contracts according to their risk and preferences, with some consumers becoming credit constrained and without access to debt. As a middle-income country, Chile has a consumer loan market with many lender types (Banks, Retail Stores, Unions, Other Lenders such as car dealers), providing a perfect setting for testing borrowerlender sorting theory. Using survey data, I show that banks have the borrowers of highest income and education and the lowest unemployment rates, while households with no access to debt have the lowest income and education and the highest unemployment risk.