Essays in financial economics

Pelosi, Marco (2022) Essays in financial economics. PhD thesis, London School of Economics and Political Science.

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Abstract

This dissertation consists of three chapters. In the first, I document advantageous selection in loan amount in the largest peer-to-peer (P2P) lender in the United States. By exploiting a natural experiment within the platform, I show that borrowers who select larger loans are less likely to default. This selection is driven by households who live in states with bankruptcy-friendly laws, where borrowers’ default costs are lower. Standard models where borrowers maximize their utility cannot rationalize my results and make the opposite prediction. In a simple model of household borrowing, I show that my results can be explained by the fact that borrowers facing higher loan prices search more intensively for cheaper loans. This effect is stronger for the safest borrowers, as they enjoy the greatest benefits from the switching. In the second chapter, co-authored with Angelo D’Andrea and Enrico Sette, studies the effect of access to broadband internet on bank credit supply to nonfinancial firms. We find that banks with branches in municipalities reached by fast internet increase loan supply, both at the extensive and the intensive margin. We document that the expansion of credit goes through two main channels: internal efficiency and competition. To increase lending, fast internet also leads banks to expand their geographical markets and to make internal credit reallocation. Finally, while broadband connection moves credit away from smaller municipalities, it still benefits local economic growth as firms obtain more credit from branches located in larger municipalities. The third chapter, co-authored with Francesco Nicolai and Simona Risteska, provides evidence of the disparity in the incidence of property taxes levied at different points in time. Housing demand is significantly less elastic with respect to taxes deferred to the future relative to taxes levied at the moment of the purchase. We attribute this difference to the lack of salience of future taxes at the moment of purchase. We provide directions on the optimal tax mix between salient and nonsalient taxes with the help of a model.

Item Type:	Thesis (PhD)
Additional Information:	© 2022 Marco Pelosi
Library of Congress subject classification:	H Social Sciences > HG Finance
Sets:	Departments > Finance
Supervisor:	Jenter, Dirk and Paravisini, Daniel
URI:	http://etheses.lse.ac.uk/id/eprint/4432

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