Collateral, Household Borrowing, and Income Distribution

Luisa Corrado and Aicha Kharazi

No BEMPS90, BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen

Abstract: In this article, we integrate a collateral constraint into a model with heterogeneous agents to study the effect of collateral on wealth inequality. We use estimates from US microeconomic data and the simulated time series from our macro model to predict the wealth accumulation response at the top and bottom of the personal income distribution. Debt is modelled as collateral-dependent and its concentration poses a serious concern. Our results indicate that high collateral requirements benefit high-income more than low-income households.

Keywords: Income distribution; household loans; collateral; inequality. (search for similar items in EconPapers)
JEL-codes: D31 E21 E25 H31 (search for similar items in EconPapers)
Pages: [57 pages]
Date: 2022-01
New Economics Papers: this item is included in nep-ban, nep-dge, nep-fdg and nep-mac
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