We study the credit market impact and real effects of one of the largest borrower bailouts in history, enacted by the government of India against the backdrop of the 2007–2008 financial crisis. We find that the bailout led to a significant reallocation of credit and greater defaults, but had no offsetting positive effect on productivity, wages, or consumption. Post-program loan performance deteriorates faster in districts with greater program exposure, an effect that is not driven by greater risk-taking of banks. Loan defaults become more sensitive to the electoral cycle after debt relief, suggesting strategic default in response to the bailout.

We study the credit market impact and real effects of one of the largest borrower bailouts in history, enacted by the government of India against the backdrop of the 2007–2008 financial crisis. We find that the bailout led to a significant reallocation of credit and greater defaults, but had no offsetting positive effect on productivity, wages, or consumption. Post-program loan performance deteriorates faster in districts with greater program exposure, an effect that is not driven by greater risk-taking of banks. Loan defaults become more sensitive to the electoral cycle after debt relief, suggesting strategic default in response to the bailout. Received December 1, 2015; editorial decision April 11, 2017 by Editor Philip Strahan.

This article provides field-experimental evidence on status goods. We work with an Indonesian bank that markets platinum credit cards to high-income customers. In a first experiment, we show that demand for the platinum card exceeds demand for a nondescript control product with identical benefits, suggesting demand for the pure status aspect of the card. Transaction data reveal that platinum cards are more likely to be used in social contexts, implying social image motivations. In a second experiment, we provide evidence of positional externalities from the consumption of these status goods. A final experiment provides suggestive evidence that increasing self-esteem causally reduces demand for status goods, indicating that social image might be a substitute for self-image.