Income Inequality, Debt Burden and COVID-19

Abstract

There have been stark differences in the ability of low-income and high-income individuals to protect themselves during the COVID-19 pandemic. Using a triple difference specification, we document that debt burdens contribute to this inequity by disproportionately increasing the cost to low-income individuals of reducing their mobility after the start of the pandemic. This effect is stronger in counties located in states with residential mortgage recourse. Furthermore, the debt burden channel is exacerbated for Black/African-American and Hispanic/Latino borrowers. Additionally, we provide suggestive evidence that this debt burden channel could have contributed to 2.71% more COVID-19 cases.

Keywords: debt burden, inequality, mobility, coronavirus, COVID-19, pandemics

JEL Classification: D63, E64, G51, I14, J15