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

  • Author(s): Coibion, Olivier;
  • Gorodnichenko, Yuriy;
  • Kudlyak, Marianna;
  • Mondragon, John
  • et al.

Published Web Location

http://eml.berkeley.edu/~ygorodni/CGKM.pdf
No data is associated with this publication.
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.

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