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Subprime Lending and Financial Inequality in an Agent-Based Model

In: Artificial Economics and Self Organization

Author

Listed:
  • Andrea Teglio

    (Universitat Jaume I)

  • Silvano Cincotti

    (Università di Genova)

  • Einar Jon Erlingsson

    (Reykjavik University)

  • Marco Raberto

    (Università di Genova)

  • Hlynur Stefansson

    (Reykjavik University)

  • Jon Thor Sturluson

    (Reykjavik University)

Abstract

Real estate bubbles often trigger financial and economic crisis. U.S. subprime mortgage crisis and the Spanish property bubble, both occurring in 2008, are recent examples whose consequences are still affecting the respective economies. The aim of this paper is to understand if the level of concentration of financial capital has an impact on the real estate bubble formation. We study the issue in a first scenario where mortgage loans are easily granted (subprime mortgages) and in second one with a stricter regulation for the access to credit. Our results show that the combination of capital concentration and easy access to credit gives rise to a strong economic instability and to a highly unequal distribution of wealth.

Suggested Citation

  • Andrea Teglio & Silvano Cincotti & Einar Jon Erlingsson & Marco Raberto & Hlynur Stefansson & Jon Thor Sturluson, 2014. "Subprime Lending and Financial Inequality in an Agent-Based Model," Lecture Notes in Economics and Mathematical Systems, in: Stephan Leitner & Friederike Wall (ed.), Artificial Economics and Self Organization, edition 127, pages 55-67, Springer.
    • Handle: RePEc:spr:lnechp:978-3-319-00912-4_5
    DOI: 10.1007/978-3-319-00912-4_5
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