Informal debt contract and consumption : evidence from the vehicle scrappage program/
Name
1036985305-MIT.pdf
Description
Full printable version
Size
2.9 MB
Format
Adobe PDF
Checksum (MD5)
56d19c8a888b1b7313f6c0399c7788b0
Author(s)
Lu, Fangzhou. Ph. D. Sloan School of Management
Advisor(s)
Jonathan Parker.
Date Issued
2018
Publisher
Massachusetts Institute of Technology
Abstract
This paper evaluate the influence of household heterogeneity on their decisions to take up the vehicle scrappage program (VSP) in China. The presence of debt owed to family and friends (DOFF) on household balance sheet significantly reduces the takeup rate of the cash for clunkers program in China, by approximately 1.57%. Moreover, this effect is stronger among households without a schedule for DOFF repayment, a formal debt contract, or positive interest rate. This suggests that informal finance can have shadow cost due to informal debt's potential recall risk, and non-pecuniary costs in the forms of social sanction. Moreover, I exploit a unique rebate mechanism of the VSP in China to show that the program design and household liquidity together play a big role in determining the take-up rate of the vehicle scrappage program.
Description
Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, 2018.
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 27-28).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
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