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Mapping fragility: Functions of wealth and social classes in U.S. household finance

Author

Listed:
  • Orsola Costantini

    (United Nations Conference on Trade and Development)

  • Carlo D'Ippoliti

    (Sapienza University of Rome)

Abstract

Which households are more exposed to financial risk and to what extent is their debt systemically relevant? To provide an answer, we advance a new classification of the population, adapted from Fessler and Schurz (2017), based on the type of wealth families own and their sources of income. Then, we investigate data from eleven waves of the Survey of Consumer Finances (SCF), a triennial survey run by the U.S. Federal Reserve, to explore the association of different debt configurations and motives to get into debt with our class distinctions. Our new approach allows us to assess competing hypotheses about debt and financial vulnerability that have so far been analyzed separately in disconnected strands of literature. The results of our study reinforce and qualify the controversial hypothesis that relative poverty and inequality of income and access to services have been important factors explaining household indebtedness and its relationship with economic growth over time.

Suggested Citation

  • Orsola Costantini & Carlo D'Ippoliti, 2023. "Mapping fragility: Functions of wealth and social classes in U.S. household finance," Working Papers Series inetwp215, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:inetwp215
    DOI: 10.36687/inetwp215
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    File URL: https://ssrn.com/abstract=4704173
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    More about this item

    Keywords

    Household debt; financial fragility; inequality; Veblen; survey of consumer finances;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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