Born to Be (Sub)Prime: An Exploratory Analysis
(2023) In AEA Papers and Proceedings 113. p.166-166- Abstract
- We study how inheriting parents' credit histories affects the initial credit scores, access to credit, and life cycle borrowing of young individuals entering the credit market. We establish that inherited histories significantly positively affect initial scores, which in turn are very persistent. Inherited histories only affect outcomes through initial credit scores, which then have significant persistent effects on credit use and access, such as having a mortgage. Our results are consistent with mechanisms of self-fulfilling liquidity traps: low credit scores mean lack of access to credit, reinforcing low credit scores. Future research should address the contribution of such mechanisms to wealth inequality.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/8d9ef6db-a039-464b-84be-f1769ca0210d
- author
- Bach, Helena ; Campa, Pietro ; De Giorgi, Giacomo ; Nosal, Jaromir and Pietrobon, Davide LU
- organization
- publishing date
- 2023-05
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- D15, Intertemporal Household Choice, Life Cycle Models and Saving, G51, Household Finance, Household Saving, Borrowing, Debt and Wealth
- in
- AEA Papers and Proceedings
- volume
- 113
- pages
- 71 pages
- publisher
- American Economic Association
- ISSN
- 2574-0768
- DOI
- 10.1257/pandp.20231096
- language
- English
- LU publication?
- yes
- id
- 8d9ef6db-a039-464b-84be-f1769ca0210d
- date added to LUP
- 2023-08-24 18:02:32
- date last changed
- 2023-08-25 11:48:49
@article{8d9ef6db-a039-464b-84be-f1769ca0210d, abstract = {{We study how inheriting parents' credit histories affects the initial credit scores, access to credit, and life cycle borrowing of young individuals entering the credit market. We establish that inherited histories significantly positively affect initial scores, which in turn are very persistent. Inherited histories only affect outcomes through initial credit scores, which then have significant persistent effects on credit use and access, such as having a mortgage. Our results are consistent with mechanisms of self-fulfilling liquidity traps: low credit scores mean lack of access to credit, reinforcing low credit scores. Future research should address the contribution of such mechanisms to wealth inequality.}}, author = {{Bach, Helena and Campa, Pietro and De Giorgi, Giacomo and Nosal, Jaromir and Pietrobon, Davide}}, issn = {{2574-0768}}, keywords = {{D15; Intertemporal Household Choice; Life Cycle Models and Saving; G51; Household Finance; Household Saving; Borrowing; Debt and Wealth}}, language = {{eng}}, pages = {{166--166}}, publisher = {{American Economic Association}}, series = {{AEA Papers and Proceedings}}, title = {{Born to Be (Sub)Prime: An Exploratory Analysis}}, url = {{http://dx.doi.org/10.1257/pandp.20231096}}, doi = {{10.1257/pandp.20231096}}, volume = {{113}}, year = {{2023}}, }