Intergenerational Linkages in Household Credit

44 Pages Posted: 30 Nov 2015  

Andra C. Ghent

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Marianna Kudlyak

FRB San Francisco

Date Written: 2015-11-05

Abstract

We document economically important correlations between children's future credit outcomes and their parents' credit risk scores, default, and the extent of credit constraints - intergenerational linkages in household credit. Using observations on siblings, we find that the linkages are due to unobserved household heterogeneity rather than parental credit conditions directly affecting children's credit outcomes. In particular, in the sample of siblings, there is no correlation between parental and child credit attributes after controlling for household fixed effects. The linkages are stronger in cities with lower intergenerational income mobility, implying that common factors drive both. Finally, existing measures of state-level educational policy interventions appear to have limited effects on the strength of intergenerational linkages.

Keywords: Household Finance, Intergenerational Mobility, Credit Constraints, Income Inequality

JEL Classification: D14, E21, G10

Suggested Citation

Ghent, Andra C. and Kudlyak, Marianna, Intergenerational Linkages in Household Credit (2015-11-05). FRB Richmond Working Paper No. 15-14. Available at SSRN: https://ssrn.com/abstract=2696385

Andra C. Ghent (Contact Author)

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Marianna Kudlyak

FRB San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Paper statistics

Downloads
50
Abstract Views
409