Intergenerational Linkages in Household Credit

No 15-14, Working Paper from Federal Reserve Bank of Richmond

Abstract: We document economically important correlations between children?s future credit outcomes and their parents? credit risk scores, default, and the extent of credit constraints ? intergenerational linkages in household credit. Using observations on siblings, we find that the linkages are due to unobserved household heterogeneity rather than parental credit conditions directly affecting children?s credit outcomes. In particular, in the sample of siblings, there is no correlation between parental and child credit attributes after controlling for household fixed effects. The linkages are stronger in cities with lower intergenerational income mobility, implying that common factors drive both. Finally, existing measures of state-level educational policy interventions appear to have limited effects on the strength of intergenerational linkages.

Keywords: Household Finance; Intergenerational Mobility; Credit Constraints; Income Inequality (search for similar items in EconPapers)
JEL-codes: D14 E21 G10 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-11-05
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
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Working Paper: Intergenerational Linkages in Household Credit (2016)
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