Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data

Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak and John Mondragon

No 2016-20, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: 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.

JEL-codes: D14 E21 E51 G21 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2016-08-10
New Economics Papers: this item is included in nep-ban, nep-ltv, nep-mac and nep-ure
Note: First Draft: December, 2013. This Draft: August, 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data (2014)
Working Paper: Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data (2014)
Working Paper: Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data (2014)
Working Paper: Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2016-20

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DOI: 10.24148/wp2016-20

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