VGSF - WU Vienna - LC

Thomas Rauter, The University of Chicago Booth School of Business

Campus WU D4.4.008 12:00 - 13:00

Organizer WU Vienna

The Fin­ance Brown Bag Sem­inar is held by the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance (WU Vi­enna) and the Vi­enna Gradu­ate School of Fin­ance (VGSF). It serves as a present­a­tion plat­form for PhD stu­dents, fac­ulty mem­bers, and vis­it­ors. An over­view of BBS on the web­site of the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance.


Decem­ber 16th, 2019, 12:00-13:00, D4.4.008

Tho­mas Rauter, The Uni­versity of Ch­icago Booth School of Busi­ness

Title: "Per­ceived Pre­cau­tion­ary Sav­ings Motives: Evid­ence from FinTech"


We study the con­sump­tion re­sponse to the pro­vi­sion of credit lines to in­di­vidu­als that pre­vi­ously did not have ac­cess to credit com­bined with the possib­il­ity to eli­cit dir­ectly a large set of pref­er­ences, be­liefs,  and motives. As ex­pec­ted, users re­act to the avail­ab­il­ity of credit by in­creas­ing their spend­ing per­man­ently and real­loc­at­ing con­sump­tion from non-dis­cre­tion­ary to dis­cre­tion­ary goods and ser­vices. Sur­pris­ingly,  though, li­quid users re­act more than oth­ers and this pat­tern is a ro­bust fea­ture of the data. Moreover, li­quid users lower their sav­ings rate, but do not tap into neg­at­ive de­pos­its. The credit line seems to act as a  form of in­sur­ance against fu­ture neg­at­ive shocks and its mere pres­ence makes users spend their ex­ist­ing li­quid­ity without ac­cu­mu­lat­ing any debt. By eli­cit­ing pref­er­ences, be­liefs, and motives dir­ectly, we show these res­ults are not fully con­sist­ent with mod­els of fin­an­cial con­straints, buf­fer stock mod­els with and without dur­ables, present-­bias pref­er­ences, un­cer­tainty about fu­ture in­come, be­quest motives, or the ca­non­ical life-­cycle per­man­ent in­come model. We la­bel this chan­nel the per­ceived pre­cau­tion­ary sav­ings chan­nel, be­cause li­quid house­holds be­have as if they faced strong pre­cau­tion­ary sav­ings motives even though no ob­serv­ables sug­gest they should based on stand­ard the­or­et­ical mod­els.

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