ABSTRACT – This paper aims to investigate some important questions of the personal credit demand of a group that is not that much studied in the academic literature: the middle income class in a large emerging market, Brazil. In order to do so, a database was used from an experiment carried out by a large credit card Brazilian issuer, in which offers of different interest rates were randomly sent to clients of two different groups. One of them comprises clients with median income of USD 20.000, and the other of USD 8.000. The first hypothesis to be investigated is on the interest sensitivity of personal credit demand, both on the extensive margin and on the intensive margin. The second group of hypotheses concerns the existence or not of problems of adverse selection in this sample and the third group of questions deals with moral hazard on whether the customer will decide to repay the loan. Results indicate that for the higher income group the demand is sensitive to the interest rates – both on the extensive margin (elastic demand) – and on the intensive margin (inelastic demand). As for the Information Asymmetries, for both groups of consumers, the pool of customers who accepted the offer are worse credit risks than those who did not accept, although there was no evidence of different credit risks among those who accepted worse offers from those who accepted better offers. The results also indicate moral hazard to be an important problem for the lower income group.
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