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Inequality and Private Credit

Author

Listed:
  • Fischer, Ronald

    (University of Chile)

  • Huerta, Diego

    (Central Bank of Chile)

  • Valenzuela, Patricio

    (University of Chile)

Abstract

This article examines whether the direction of the effect of inequality on private credit depends on the capital constraints of individual countries, as predicted by Balmaceda and Fischer (2010). Consistent with the model's predictions, we find that greater income inequality leads to a higher ratio of private credit to GDP in economies with low incomes and weak legal rights, whereas the reverse is true in economies with high incomes and strong legal rights.

Suggested Citation

  • Fischer, Ronald & Huerta, Diego & Valenzuela, Patricio, 2015. "Inequality and Private Credit," Working Papers 15-12, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:15-12
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    File URL: http://fic.wharton.upenn.edu/fic/papers/15/p1512.html
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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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