Working Paper

Intergenerational Linkages in Household Credit


Abstract: We document economically important correlations between children?s future credit outcomes and their parents? credit risk scores, default, and the extent of credit constraints ? intergenerational linkages in household credit. Using observations on siblings, we find that the linkages are due to unobserved household heterogeneity rather than parental credit conditions directly affecting children?s credit outcomes. In particular, in the sample of siblings, there is no correlation between parental and child credit attributes after controlling for household fixed effects. The linkages are stronger in cities with lower intergenerational income mobility, implying that common factors drive both. Finally, existing measures of state-level educational policy interventions appear to have limited effects on the strength of intergenerational linkages.

Keywords: Intergenerational Mobility; Household Finance; Income Inequality; Credit Constraints;

JEL Classification: G10; E21; D14;

Access Documents

Authors

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Working Paper

Publication Date: 2015-11-05

Number: 15-14

Pages: 43 pages