I design a randomized trial at a European retail bank, where credit lines are deliberately varied to consumers. I find that credit availability has a precisely measured and economically large effect on spending, and this effect is not confined to a small set of constrained consumers who are up against their limits. Novel findings rule out complete markets, PIH, spender-saver, buffer-stock, and a range of myopic models.
Revise and resubmit, Journal of Political Economy
People exhibit a preference for equality of opportunity ex ante, and a preference for equality of outcomes ex post. Time inconsistent subjects are aware of this proclivity, and avoid precommitments to retain the flexibility to manifest time inconsistency. Behavior is best explained by a theory of nominal fairness.