Evidence-Based Policymaking: Small-Dollar Loans. Jonathan Zinman Dartmouth College, IPA, J-PAL May 30, 2013. Scope and Approach for Today. - Conceptual : not a literature review But happy to address questions about specific studies or literatures -Focus on payday loans to fix ideas
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Dartmouth College, IPA, J-PAL
May 30, 2013
-Conceptual: not a literature review
-Focus on payday loans to fix ideas
-We don’t know much
-Hard to improve outcomes if we don’t know much
-Weak motivation for standard “protections”
-Many “surgical” approaches hold promise
-Punchline: a 21st-century agency should approach this space with a direct (social) marketing and R&D mindset
-A methodology that convincingly addresses the classic social science problem and plausibly identifies cause and effect
-Tempting to abandon this standard in the small-dollar space. So much seems/feels broken:
-Microcredit serves as cautionary tale of story-based policymaking
-Loans finance “recurring expenses”
-Does small-dollar do more harm than good?
-Punchline: evidence does not move us away from standard priors
-Is market on its way to providing alternatives that marginalize the payday model?
-Related: why gap in the “lending ladder”?
-Why do people go wrong?
-Fixes should target these biases
20th century: subsidies
21st century: “Catalyst”-type approach
20th century approaches:
21st century approaches:
20th century approaches: bans, mandatory cooling off periods
21st century approach: Beta-test voluntary versions of these (“commitment devices”).
How should a 21st-century regulator move forward in small-dollar space?