{"id":{"repo_id":"mit","oai_identifier":"oai:dspace.mit.edu:1721.1/151232"},"canonical_url":"https://search.dev.ndltd.org/etd/mit/oai:dspace.mit.edu:1721.1/151232","repository":{"repo_id":"mit","name":"MIT","base_url":"https://dspace.mit.edu/oai/request"},"display":{"title":"The Propensity to Borrow out of Expected Permanent Income","abstract":"One prediction of the Permanent Income Hypothesis is that households who are illiquid may wish to borrow against future income when there is a positive shock to their future income process. We informally model this prediction in a two-period setting and then test it using Equifax data. We demonstrate that Democrats experience a strong, positive shock to their expectations about their future real income around the 2020 presidential election. Our difference-in-difference analysis finds that in response Democrats were 0.08% more likely to take on debt in order to buy a car, and that their outstanding auto loan balance increased by $104 on average. Compared to the rate at which Democrats purchased cars via loan prior to the election, this 0.08% increase represents a 1.37% increase in the purchase rate. We validate our results by finding a similar result holds for installment loan purchases. We show that this result is robust to our empirical assumptions.","abstract_html":"One prediction of the Permanent Income Hypothesis is that households who are illiquid may wish to borrow against future income when there is a positive shock to their future income process. We informally model this prediction in a two-period setting and then test it using Equifax data. We demonstrate that Democrats experience a strong, positive shock to their expectations about their future real income around the 2020 presidential election. Our difference-in-difference analysis finds that in response Democrats were 0.08% more likely to take on debt in order to buy a car, and that their outstanding auto loan balance increased by $104 on average. Compared to the rate at which Democrats purchased cars via loan prior to the election, this 0.08% increase represents a 1.37% increase in the purchase rate. We validate our results by finding a similar result holds for installment loan purchases. We show that this result is robust to our empirical assumptions.","abstract_has_math":false,"creators":["Wilson, John"],"institution":"Massachusetts Institute of Technology","degree_name":"Master","degree_level":null,"degree_discipline":null,"degree_department":"Sloan School of Management","school":null,"contributors":[],"advisors":["Palmer, Christopher"],"committee_chairs":[],"committee_members":[],"year":2023,"date_issued":"2023-06","date_published":"2023-06","updated_at":"2026-07-22T22:20:57Z","subjects":[],"languages":[],"rights":["In Copyright - Educational Use Permitted","Copyright retained by author(s)"],"rights_urls":["https://rightsstatements.org/page/InC-EDU/1.0/"],"identifier_entries":[]},"links":{"outbound_url":"https://hdl.handle.net/1721.1/151232","outbound_label":"Handle","outbound_source":"dc:identifier.uri"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor.advisor","label":"Advisor","values":["Palmer, Christopher"]},{"key":"dc:contributor.department","label":"Department","values":["Sloan School of Management"]},{"key":"dc:creator","label":"Author","values":["Wilson, John"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.accessioned","label":"Dc Date Accessioned","values":["2023-07-31T19:24:37Z"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2023-07-31T19:24:37Z"]},{"key":"dc:date.issued","label":"Date","values":["2023-06"]},{"key":"dc:publisher","label":"Institution","values":["Massachusetts Institute of Technology"]},{"key":"dc:type","label":"Dc Type","values":["Thesis"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Master","Master of Science in Management Research"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:rights","label":"Dc Rights","values":["In Copyright - Educational Use Permitted","Copyright retained by author(s)"]},{"key":"dc:rights.uri","label":"Rights URI","values":["https://rightsstatements.org/page/InC-EDU/1.0/"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.uri","label":"Identifier URI","values":["https://hdl.handle.net/1721.1/151232"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["One prediction of the Permanent Income Hypothesis is that households who are illiquid may wish to borrow against future income when there is a positive shock to their future income process. We informally model this prediction in a two-period setting and then test it using Equifax data. We demonstrate that Democrats experience a strong, positive shock to their expectations about their future real income around the 2020 presidential election. Our difference-in-difference analysis finds that in response Democrats were 0.08% more likely to take on debt in order to buy a car, and that their outstanding auto loan balance increased by $104 on average. Compared to the rate at which Democrats purchased cars via loan prior to the election, this 0.08% increase represents a 1.37% increase in the purchase rate. We validate our results by finding a similar result holds for installment loan purchases. We show that this result is robust to our empirical assumptions."]},{"key":"dc:description.degree","label":"Dc Description Degree","values":["S.M."]},{"key":"dc:title","label":"Title","values":["The Propensity to Borrow out of Expected Permanent Income"]}]}],"canonical_facts":{"dc:contributor.advisor":["Palmer, Christopher"],"dc:contributor.department":["Sloan School of Management"],"dc:creator":["Wilson, John"],"dc:date.accessioned":["2023-07-31T19:24:37Z"],"dc:date.available":["2023-07-31T19:24:37Z"],"dc:date.issued":["2023-06"],"dc:description.abstract":["One prediction of the Permanent Income Hypothesis is that households who are illiquid may wish to borrow against future income when there is a positive shock to their future income process. We informally model this prediction in a two-period setting and then test it using Equifax data. We demonstrate that Democrats experience a strong, positive shock to their expectations about their future real income around the 2020 presidential election. Our difference-in-difference analysis finds that in response Democrats were 0.08% more likely to take on debt in order to buy a car, and that their outstanding auto loan balance increased by $104 on average. Compared to the rate at which Democrats purchased cars via loan prior to the election, this 0.08% increase represents a 1.37% increase in the purchase rate. We validate our results by finding a similar result holds for installment loan purchases. We show that this result is robust to our empirical assumptions."],"dc:description.degree":["S.M."],"dc:identifier.uri":["https://hdl.handle.net/1721.1/151232"],"dc:publisher":["Massachusetts Institute of Technology"],"dc:rights":["In Copyright - Educational Use Permitted","Copyright retained by author(s)"],"dc:rights.uri":["https://rightsstatements.org/page/InC-EDU/1.0/"],"dc:title":["The Propensity to Borrow out of Expected Permanent Income"],"dc:type":["Thesis"],"thesis:degree_name":["Master","Master of Science in Management Research"]},"updated_at":"2026-07-22T22:20:57Z"}