Rising indebtedness and temptation: A welfare analysis

• 成果类型: Article
• 署名作者: Nakajima, Makoto
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Philadelphia
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE87
• 发表日期: 2012
• 页码: 257-288
• 关键词: Temptation; self-control; hyperbolic discounting; overborrowing; heterogeneous agents; general equilibrium

摘要

Is the observed large increase in consumer indebtedness since 1970 beneficial for U.S. consumers? This paper quantitatively investigates the macroeconomic and welfare implications of relaxing borrowing constraints using a model with preferences featuring temptation and self-control. The model can capture two contrasting views: the positive view, which links increased indebtedness to financial innovation and thus better consumption smoothing, and the negative view, which is associated with consumers' overborrowing. I find that the latter is sizable: the calibrated model implies a social welfare loss equivalent to a 0.4 percent decrease in per-period consumption from the relaxed borrowing constraint consistent with the observed increase in indebtedness. The welfare implication is strikingly different from the standard model without temptation, which implies a welfare gain of 0.7 percent, even though the two models are observationally similar. Although both models imply welfare gains from a tighter borrowing limit than in 2000s, the optimal borrowing limit is tighter according to the temptation model, as a tighter borrowing limit helps consumers avoiding overborrowing.