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When Your Word Is Not Enough: Race, Collateral, and Household Credit

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  • Olney, Martha L.

Abstract

Black families included in the 1918/19 BLS Consumer Purchases Survey used installment credit more frequently and merchant credit less frequently than White families. Economic and demographic characteristics explain the racial difference for installment but not for merchant credit. I argue greater demand for installment credit by Black families was satisfied because repossession of collateral upon buyer default overcame merchants' personal prejudice with regard to creditworthiness, but absence of tangible collateral impacted the availability of merchant credit. Low use of merchant credit can account for relatively high interwar saving rates for low-income Black families.

Suggested Citation

  • Olney, Martha L., 1998. "When Your Word Is Not Enough: Race, Collateral, and Household Credit," The Journal of Economic History, Cambridge University Press, vol. 58(2), pages 408-431, June.
    • Handle: RePEc:cup:jechis:v:58:y:1998:i:02:p:408-431_02
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    Cited by:

    1. Gagnon, Julien & Geloso, Vincent & Isabelle, Maripier, 2023. "The incubated revolution: Education, cohort effects, and the linguistic wage gap in Quebec during the 20th century," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 327-349.
    2. Song Han, 2001. "On the Economics of Discrimination in Credit Markets," Finance and Economics Discussion Series 2002-02, Board of Governors of the Federal Reserve System (U.S.).
    3. Song Han, 2004. "Discrimination in Lending: Theory and Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 29(1), pages 5-46, July.
    4. John A. James & Michael G. Palumbo & Mark Thomas, 2007. "Consumption smoothing among working-class American families before social insurance," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 606-640, October.
    5. Fausto Hernández-Trillo & Ana Laura Martínez-Gutiérrez, 2022. "The Dark Road to Credit Applications: The Small-Business Case of Mexico," Journal of Financial Services Research, Springer;Western Finance Association, vol. 62(1), pages 1-25, October.
    6. Hrung, Warren B., 2002. "Parental housing values and children's consumption," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 521-529, July.

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