Greater Inequality and Household Borrowing
Greater Inequality and Household Borrowing: New Evidence from Household Data
Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak, and John Mondragon.
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 one possible mechanism.
Key words: Inequality. Household debt. Credit. Income. Great Recession
Presentations:
FRB SF (Feb 2016), U Houston (Feb 2016), European University Institute (Nov 2015), Bank of Netherlands (Nov 2015), FRB Philadelphia Payments Center (Nov 3, 2015), Annual Congress of the European Economic Association, Mannheim, Germany (24-27 Aug, 2015), FR Board (August 2015), BYU Red Rock Conference, Utah (September, 2014)*, EEA-ESEM, Toulouse, France (August, 2014), International Banking, Economics and Finance Association, Western Economic Association*, Denver CO (2014), NBER SI EFG Group (2014), NBER SI Monetary Economics Group (2014), SED (June 2014), NY FED (May 2014), University of Cologne*, VCU (April 2014), Tinbergen Institute*, London Business School*, CREI*, Boston College*, Texas A&M University*, University of Houston/Rice*, FRB St. Louis (2013), 4th Ifo Conference on “Macroeconomics and Survey Data”, Munich, Germany (2013)*
Media coverage: Washington Post, The News Tribune UniBul Credit Card Blog, VoxEU