Ethno-racial and relative income disparities in access to mortgage credit

Loya, José

doi:10.1016/j.rssm.2023.100785

Cited by 3 publications

(1 citation statement)

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“…The stratified environment not only decides the amount of debt households can carry but also differentiates mainstream financial services from alternative organizations, resulting in differential access among social groups to credit resources (Faber 2019;Seamster 2019;Small et al 2021). Growing stratification studies have shown that racial minorities and low-income households carry a higher debt burden or more unsecured debt (Fligstein and Goldstein 2015;Houle and Addo 2018;Lin and Neely 2020;Loya 2023). Thus, analyzing banking organizations could uncover the growth of household debt burden and bridge the literature between economic sociology and social stratification.…”

Section: Theoretical Backgroundsmentioning

confidence: 99%

In the Red: How Bank Concentration Fuels Debt Burden for Households, 1995–2019

2024

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From 1995 to 2019, the average household debt burden in OECD countries increased from 71% to 127%. While financial deregulation and welfare retrenchment have been identified as key contributing factors, the impact of bank concentration on this trend has remained less understood. This study explores the contribution of bank concentration to household debt burden by analyzing data from the Luxembourg Wealth Study, covering over one million households across 16 affluent democracies during the same period. Results show that an increase in country-level bank concentration leads to a higher household-level debt burden. To uncover the mechanisms at play, I evaluate two hypotheses: market power and resource partitioning. Contrary to the expectations of the market power hypothesis, causal mediation analysis indicates that the relationship between bank concentration and household debt burden is not mediated by increased profitability in the banking sector. Instead, the evidence supports the resource partitioning theory, highlighting the significant role of nonbank financial organizations. Notably, the study finds that the non-housing debt burden of low-income households is particularly influenced by the proliferation of these organizations. This research sheds light on an overlooked driver of household indebtedness, illustrating an organizational process of debt-based accumulation that stratifies household wealth.

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