Viktar Fedaseyeu

The Economics of Debt Collection: Enforcement of Consumer Credit Contracts

In the U.S., third-party debt collection agencies employ more than 140,000 people and recover more than

Debt Collection Agencies and the Supply of Consumer Credit

50 billion each year, mostly from consumers. Informational, legal, and other factors suggest that original creditors should have an advantage in collecting debts owed to them. Then, why does the debt collection industry exist and why is it so large? Explanations based on economies of scale or specialization cannot address many of the observed stylized facts. The authors develop an application of common agency theory that better explains those facts. The model explains how reliance on an unconcentrated industry of third-party debt collection agencies can implement an equilibrium with more intense collections activity than creditors would implement by themselves. The authors derive empirical implications for the nature of the debt collection market and the structure of the debt collection industry. A welfare analysis shows that, under certain conditions, an equilibrium in which creditors rely on third-party debt collectors can generate more credit supply and aggregate borrower surplus than an equilibrium where lenders collect debts owed to them on their own. There are, however, situations where the opposite is true. The model also suggests a number of policy instruments that may improve the functioning of the collections market.

Board Roles, Director Compensation, and CEO power

The activities of third-party debt collectors affect millions of borrowers. However, relatively little is known about their impact on consumer credit. To study this issue, I investigate whether state debt collection laws affect the ability of third-party debt collectors to recover delinquent debts and if this, in turn, affects the amount of credit being provided. This paper constructs, from state statutes and session laws, a state-level index of debt collection restrictions and uses changes in this index over time to estimate the impact of debt collection laws on revolving credit. Stricter debt collection regulations appear to reduce the number of third-party debt collectors and to lower recovery rates on delinquent credit card loans. This, in turn, leads to fewer openings of credit cards.

Voter Preferences and Political Change: Evidence From Shale Booms

Prior research suggests that the effectiveness of corporate directors depends on their qualifications. We investigate whether directors’ qualifications are reflected in their pay. We find significant variation in director compensation both across and within boards, with more than a third of the variation in director pay attributable to differences among members of the same board. On average, more qualified directors receive higher pay, while CEO-appointed (“co-opted”) directors do not. However, co-opted directors receive higher pay on boards where the CEO’s influence is high. We also provide evidence that the market values qualified directors and discounts co-opted ones.

A Theory of Inefficient College Entry and Excessive Student Debt

Hydraulic fracking generated unexpected shale oil and gas booms. After these booms, voter support for Republicans rises, leading Republicans to win seats from Democrats. Roll-call voting by House members becomes more conservative after shale across issues extending beyond energy or the economy. The results suggest that changes in preferences on specific issues can have broad spillover effects across a wide range of policy outcomes.

Do Qualifications Matter? New Evidence on Director Compensation

Abstract When workers are myopic and the amount of financing provided by the government is sufficiently large, some workers acquire education even if they are better off without it. We show that government-provided loans generate a propagation mechanism that exacerbates inefficient college entry. Further, the extent of this inefficiency depends on the speed at which loans are provided, and not just on their amount. The extent of inefficient college entry also depends on the distribution of myopic workers in the population, and inefficiencies can arise even if not all workers are myopic. We extend the model to study the impact of the dropout rate and heterogeneous expectations as well the dynamic implications of inefficient college entry.

A Theory of Student Overborrowing

Prior research suggests that the effectiveness of corporate directors depends on their qualifications. We investigate whether directors’ qualifications are reflected in their pay. We find significant variation in director compensation both across and within boards, with more than a third of the variation in director pay attributable to differences among members of the same board. On average, more qualified directors receive higher pay, while CEO-appointed (“co-opted”) directors do not. However, co-opted directors receive higher pay on boards where the CEO’s influence is high. We also provide evidence that the market values qualified directors and discounts co-opted ones.

A Theory of Corporate Boards and Forced CEO Turnover

When workers are myopic and the amount of financing provided by the government is sufficiently large, some workers acquire education even if they are better off without it. We show that government-provided loans generate a propagation mechanism that exacerbates inefficient college entry. Further, the extent of this inefficiency depends on the speed at which loans are provided, and not just on their amount. The extent of inefficient college entry also depends on the distribution of myopic workers in the population, and inefficiencies can arise even if not all workers are myopic.We investigate the role of government-provided loans on market outcomes. First, we show that government-provided financing can lead to asset bubbles when enough households have adaptive expectations and determine the minimum share of households with adaptive expectation that is sufficient for bubbles to arise. Second, we show that in addition to causing bubbles government-provided loans can generate a propagation mechanism behind them. Third, we show that bubbles can be avoided if financing is provided over a sufficiently large number of periods rather than all at once, even when households have adaptive expectations.