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Working Paper
Spending responses to state sales tax holidays
Agarwal, Sumit; McGranahan, Leslie (2012)
Every year over 20 states offer sales tax holidays (STHs) on specific items like clothes, shoes and other items to encourage consumption, affecting over 100 million consumers. We use a unique dataset of credit cards transaction to study the spending response to these holidays. Using a diff-in-diff methodology, we find that STHs increase overall daily spending by 8%, with large percentage increases in spending on children?s clothes and shoes of 193% and 98% respectively. Consumers with children increase spending more during STHs. Our estimates of price elasticities range from 6 for big box ...
Working Paper Series , Paper WP-2012-10

Working Paper
Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program
Agarwal, Sumit; Ben-David, Itzhak; Seru, Amit; Piskorski, Tomasz; Chomsisengphet, Souphala; Amromin, Gene (2013-11-30)
The main rationale for policy intervention in debt renegotiation is to enhance such activity when foreclosures are perceived to be inefficiently high. We examine the ability of the government to influence debt renegotiation by empirically evaluating the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries (servicers) with sizeable financial incentives to renegotiate mortgages. A difference-in-difference strategy that exploits variation in program eligibility criteria reveals that the program generated an overall increase in the intensity of ...
Working Paper Series , Paper WP-2013-27

Conference Paper
Summary of \"benefits of relationship banking: evidence from consumer credit markets\"
Agarwal, Sumit; Liu, Chunlin; Chomsisengphet, Souphala (2008)
Proceedings , Paper 1079

Journal Article
How do private firms use credit lines?
Agarwal, Sumit; Chomsisengphet, Souphala; Driscoll, John C. (2011-04)
The authors find that firms that face higher upfront commitment fees, risk premium spreads or usage fees have smaller credit lines, while those with higher overdraft fees have larger ones. Firms with greater profit growth in the past have larger credit lines, while those with more internal funds or higher volatility in profit growth have smaller credit lines. The results for line utilization are quite similar.
Economic Perspectives , Volume 35 , Issue Q II , Pages 71-79

Working Paper
Cognitive abilities and household financial decision making
Agarwal, Sumit; Mazumder, Bhashkar (2011)
We analyze the effects of cognitive abilities on two examples of consumer financial decisions where suboptimal behavior is well defined. The first example refers to consumers who transfer the entire balance from an existing credit card account to a new account, but use the new card for convenience transactions, resulting in higher interest charges. The second example refers to consumers who face higher APRs because they inaccurately estimate their property value on a home equity loan or line of credit application. We match individuals from the US military for whom we have detailed test scores ...
Working Paper Series , Paper WP-2010-16

Working Paper
Does it pay to read your junk mail? evidence of the effect of advertising on home equity credit choices
Agarwal, Sumit; Ambrose, Brent W. (2008)
We examine the effect of direct mail (commonly referred to as junk mail) advertising on individual financial decisions by studying consumer choice of home equity debt contracts. Consistent with the theoretical predictions, we find that financial variables underlying the relative pricing of debt contracts are the leading factors explaining consumers home equity debt choice. Furthermore, we also find that the intended use of debt proceeds significantly impacts consumer choice. However, when we study a subset of consumers who received a direct mail solicitation for a particular debt contract ...
Working Paper Series , Paper WP-08-09

Working Paper
Do Minimum Wage Increases Benefit Intended Households? Evidence from the Performance of Residential Leases
Ambrose, Brent W.; Diop, Moussa; Agarwal, Sumit (2019-07-10)
Prior studies debating the e?ects of changes to the minimum wage concentrate on impacts on household income and spending or employment. We extend this debate by examining the impact of changes to the minimum wage on expenses associated with shelter, a previously unexplored area. Increases in state minimum wages signi?cantly reduce the incidence of renters defaulting on their lease contracts by 1.29 percentage points over three months, relative to similar renters who did not experience an increase in the minimum wage. This represents 25.7% fewer defaults post treatment in treated states. To ...
Working Papers , Paper 19-28

Working Paper
The age of reason: financial decisions over the lifecycle
Agarwal, Sumit; Gabaix, Xavier; Laibson, David I.; Driscoll, John C. (2007)
The sophistication of financial decisions varies with age: middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults. We document this pattern in ten financial markets. The measured effects cannot be explained by observed risk characteristics. The sophistication of financial choices peaks around age 53 in our cross-sectional data. Our results are consistent with the hypothesis that financial sophistication rises and then falls with age, although the patterns that we observe represent a mix of age effects and cohort effects.
Working Paper Series , Paper WP-07-05

Working Paper
Loan commitments and private firms
Agarwal, Sumit; Chomsisengphet, Souphala; Driscoll, John C. (2004)
Bank lending is an important source of funding for firms. Most loans are in the form of credit lines. Empirical studies of line demand have been complicated by their use of data on publicly traded firms, which have a wide menu of financing options. We avoid this problem by using a unique proprietary data set from a large financial institution of loan commitments made to 712 privately-held firms. We test Martin and Santomero's (1997) model, in which lines give firms the speed and flexibility to pursue investment opportunities. Our findings are consistent with their predictions. Firms facing ...
Finance and Economics Discussion Series , Paper 2004-27

Working Paper
Who Pays For Your Rewards? Redistribution in the Credit Card Market
Agarwal, Sumit; Presbitero, Andrea F.; Silva, André F.; Wix, Carlo (2023-01-20)
We study credit card rewards as an ideal laboratory to quantify redistribution between consumers in retail financial markets. Comparing cards with and without rewards, we find that, regardless of income, sophisticated individuals profit from reward credit cards at the expense of naive consumers. To probe the underlying mechanisms, we exploit bank-initiated account limit increases at the card level and show that reward cards induce more spending, leaving naive consumers with higher unpaid balances. Naive consumers also follow a sub-optimal balance-matching heuristic when repaying their credit ...
Finance and Economics Discussion Series , Paper 2023-007

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