Consumer Loans, Heterogeneous Interest Rates, and Inequality
Peer Reviewed
Date issued
March 2023
Subject
Interest Rate;
Bank Loan;
Wage Dispersion;
Rating;
Consumer Credit;
Payroll;
Equality of Opportunity;
Income Distribution;
Economy;
Credit Market;
Minimum Wage
JEL code
E21 - Consumption • Saving • Wealth;
G51 - Household Saving, Borrowing, Debt, and Wealth;
O17 - Formal and Informal Sectors • Shadow Economy • Institutional Arrangements
Category
Discussion Papers
Using the Brazilian administrative credit registry data with the universe of all consumer loans originated by banks in the country from 2013 to 2019, we document high borrowing interest rates, which vary systematically with individuals characteristics. In particular, even after controlling for several observable individual attributes (such as income, occupation, and default probabilities, low-income), individuals pay higher interest rates than high-income borrowers.
