Credit, Income, and Inequality
Access to credit plays a central role in shaping economic opportunities of households and businesses. Access to credit also plays a crucial role in helping an economy successfully exit from the pandemic doldrums. The ability to get a loan may allow individuals to purchase a home, invest in education and training, or start and then expand a business. Hence access to credit has important implications for upward mobility and potentially also for inequality. Adverse selection and moral hazard problems due to asymmetric information between lenders and borrowers affect credit availability. Because ...
Anchor Institution Strategies in the Southeast: Working with Hospitals and Universities to Support Inclusive Growth
Engaging universities and hospitals to address economic disparities—often referred to as anchor institution strategies—has been understudied in the Southeast. The author examines efforts to launch anchor institution strategies in the Southeast. First, the author reviews the anchor institution concept in economic development, noting how the strategy has evolved from single institutions focusing on a set of neighborhoods to expanding to multi-institution collaboratives that attempt to tackle economic inequalities at a city or regional level. Second, the author offers case studies of New ...
Credit and Income Inequality
How does credit access for small business owners affect income inequality? A bank’s cutoff rule, employed in the decision to grant loans and based on applicants’ credit scores, provides us with the exogenous variation needed to answer this question. Analyzing uniquely detailed loan application data, we find that application acceptance increases recipients’ income five years later by more than 10 percent compared to denied applicants. This effect is mostly driven by upward mobility of poor individuals, especially if credit-constrained, thereby reducing income inequality among those who ...
Your Friends, Your Credit: Social Capital Measures Derived from Social Media and the Credit Market
Chetty et al. (2022a) introduced an array of social capital measures derived from Facebook friendships and found that one of these indicators, economic connectedness (EC), predicted upward income mobility well. Bricker and Li (2017) proposed the average credit score of a community's residents as an indicator of local social trust. We show in this paper that the average credit scores are robustly correlated with EC, negatively correlated with the friending-bias measure introduced in Chetty et al. (2022b), and predict economic mobility to a comparable extent after controlling for EC. The ...
Benjamin Franklin Birthday Celebration
Barriers to economic mobility prevent many low-income children from reaching their potential, Federal Reserve Bank of Philadelphia President Patrick T. Harker said today in remarks delivered at the Ben Franklin Birthday Celebration. President Harker said that understanding these barriers is integral to fostering growth across demographics
An Update on Wealth Mobility
We measure wealth mobility in the United States. Using the latest wave of the Panel Study of Income Dynamics (PSID), we update Carroll and Hoffman (2017), who document a decreasing trend in wealth mobility over the past 30 years. We confirm another of their findings that large upward movements in wealth are associated with families’ owning businesses and real estate other than a primary residence. Finally, we turn to the much larger Survey of Income and Program Participation (SIPP) data and document that these “large mover” households are evident even over three-year periods.
The Decline in Access to Jobs and the Location of Employment Growth in US Metro Areas: Implications for Economic Opportunity and Mobility
Job access, defined as the number or share of jobs found within a fixed distance or travel time from a worker’s residence, is an important indicator of economic opportunity and mobility. Access to jobs has been associated with positive individual economic outcomes for low-income minority workers.1 By contrast, low rates of job access have been linked to longer unemployment spells and lower rates of generational economic mobility.2Increasing job accessibility has been found to significantly decrease the duration of joblessness among lower-income displaced workers, especially for African ...
The monetary policy outlook and the importance of higher education for economic mobility: remarks at the Council for Economic Education’s 56th Annual Financial Literacy & Economic Education Conference, New York City
Remarks at the Council for Economic Education?s 56th Annual Financial Literacy & Economic Education Conference, New York City.
Remarks at the Economic Press Briefing on the Regional Economy, Federal Reserve Bank of New York, New York City
Remarks at the Economic Press Briefing on the Regional Economy, Federal Reserve Bank of New York, New York City.
New Data on Wealth Mobility and Their Impact on Models of Inequality
Using data on families? wealth over time, we calculate changes in relative wealth mobility; that is, how likely families are to move up or down the wealth distribution, relative to one another. We find families have become less likely to change their position in the wealth distribution over time, and those that do move are less likely to go very far. We also look at the savings behaviors that are associated with more mobile families and find that families that make large movements through the wealth distribution appear to be more likely to own some form of a risky asset.