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Working Paper Series
Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data
Using household-level debt data over 2000-2012 and local variation in inequality, we show that low-income households in high-inequality regions (zip-codes, counties, states) accumulated less debt (relative to their income) than low-income households in lower-inequality regions, contrary to the prevailing view. Furthermore, the price of credit is higher and access to credit is harder for low-income households in high-inequality versus low-inequality regions. Lower quantities combined with higher prices suggest that the debt accumulation pattern by household income across areas with different inequality is a result of credit supply rather than credit demand. We propose a lending model to illustrate the mechanism.
Cite this item
Olivier Coibion & Yuriy Gorodnichenko & Marianna Kudlyak & John Mondragon, Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data, Federal Reserve Bank of San Francisco, Working Paper Series 2016-20, 10 Aug 2016, revised 01 Aug 2016.
Note: First Draft: December, 2013. This Draft: August, 2016
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This item with handle RePEc:fip:fedfwp:2016-20
is also listed on EconPapers
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