Stefania Albanesi
Stefania Albanesi is a Professor of Economics at the University of Pittsburgh, a Research Associate at the NBER, and a CEPR Research Fellow. She obtained a PhD from Northwestern University, and has since held position at various universities and institutions in the US and Europe. She has published widely in the top journals of the profession, with special emphasis on the implications of inequality and the distributional effects of government policy.
Professor Stefania Albanesi conducted a widely interactive discussion live from a virtual Panmure.
Summary
The allocation of debt to consumers in the United States is mainly determined by credit scores, which rank consumers based on their predicted probability of default.
There is little public information on the performance of credit scores, and this lack of transparency may lead to inefficiencies and biases in the allocation of consumer credit.
We develop a prediction model of consumer default that can be used to score consumers. We show that its performance is superior to credit scores in all dimensions. Our model is transparent and interpretable, and allows us to uncover the most important factors associated with consumer default at the individual and aggregate level.
With our approach, young and low income households would gain access to more credit at cheaper interest rates, leading to cost savings for both consumers and lenders.