Greater Inequality and Household Borrowing: New Evidence from Household Data

Coibion, Olivier; Gorodnichenko, Yuriy; Kudlyak, Marianna; Mondragon, John

doi:10.1093/jeea/jvz076

Cited by 30 publications

(32 citation statements)

References 25 publications

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“…In a theoretical model, Kumhof, Rancière, and Winant (2015) show that higher savings of the rich may lead to a decline in interest rates, which leads to higher borrowing by low-and middle-income households and higher financial fragility. However, Coibion et al (2020) find that low-income households face higher borrowing costs and reduced access to credit as inequality increases. Adelino, Schoar, and Severino (2016) and Albanesi, De Giorgi, and Nosal (2017) provide complementary evidence on the debt boom during the 2000s and highlight the important role of the middle class for the debt boom during these years.…”

Section: Literaturementioning

confidence: 90%

Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

et al. 2020

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This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new householdlevel dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. housing debt between the 1980s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.

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Section: Literaturementioning

confidence: 90%

Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

et al. 2020

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“…A second avenue is to further unpack the sorting into low-quality jobs as a key channel through which RGI is found to lead to stagnant income growth among the poor. To what extent is this due to unequal access to good education that may lead to "quality sorting" (Hirsch and Macpherson, 2004), differential access to credits (Coibion et al, 2020), or differences in early employment activity that may lead to different school continuation decisions (Ahituv and Tienda, 2004)?…”

Section: Discussionmentioning

confidence: 99%

Does Race and Gender Inequality Impact Income Growth?

Marrero¹,

Rodríguez²,

Weide³

2021

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Section: Literaturementioning

confidence: 90%

Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

Bartscher¹,

Kuhn

Schularick

et al. 2020

SSRN Journal

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This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.

show abstract

Greater Inequality and Household Borrowing: New Evidence from Household Data

Cited by 30 publications

References 25 publications

Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

Does Race and Gender Inequality Impact Income Growth?

Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

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