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Collateral, Household Borrowing, and Income Distribution

Author

Listed:
  • Luisa Corrado

    (University of Rome Tor Vergata, Italy)

  • Aicha Kharazi

    (Free University of Bozen-Bolzano, Italy)

Abstract

In this article, we integrate a collateral constraint into a model with heterogeneous agents to study the effect of collateral on wealth inequality. We use estimates from US microeconomic data and the simulated time series from our macro model to predict the wealth accumulation response at the top and bottom of the personal income distribution. Debt is modelled as collateral-dependent and its concentration poses a serious concern. Our results indicate that high collateral requirements benefit high-income more than low-income households.

Suggested Citation

  • Luisa Corrado & Aicha Kharazi, 2022. "Collateral, Household Borrowing, and Income Distribution," BEMPS - Bozen Economics & Management Paper Series BEMPS90, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps90
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    References listed on IDEAS

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    More about this item

    Keywords

    Income distribution; household loans; collateral; inequality.;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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