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Borrow to be the poor or the rich? It depends: Credit market and wealth accumulation

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  • Wu, Bangzheng
  • Yue, Pengpeng
  • Zuo, Shengqiang

Abstract

We investigate the relationship between access to credit and wealth accumulation to understand the rising wealth inequality. Empirical results suggest an asymmetric heterogeneity over the whole range of wealth distribution. There is a significantly negative relationship between household debt and wealth accumulation for poor households but a significantly positive relationship for wealthy households. Wealthy households could better benefit from the investment debt, but poor households fail. We discuss the two channels of entrepreneurship and investment behaviors. This paper contributes to the literature on wealth distribution by mapping the relationships between the credit market and household wealth accumulation.

Suggested Citation

  • Wu, Bangzheng & Yue, Pengpeng & Zuo, Shengqiang, 2023. "Borrow to be the poor or the rich? It depends: Credit market and wealth accumulation," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 804-821.
    • Handle: RePEc:eee:reveco:v:86:y:2023:i:c:p:804-821
    DOI: 10.1016/j.iref.2023.03.037
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    More about this item

    Keywords

    Wealth accumulation; Household wealth; Wealth equality; Wealth mobility; Credit market;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G50 - Financial Economics - - Household Finance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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