Credit and Income Inequality

84 Pages Posted: 29 Jun 2020 Last revised: 22 Apr 2024

See all articles by Manthos D. Delis

Manthos D. Delis

Audencia Business School

Fulvia Fringuellotti

Federal Reserve Banks - Federal Reserve Bank of New York

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2021


How does credit access for small business owners affect income inequality? A bank’s cutoff rule, employed in the decision to grant loans and based on applicants’ credit scores, provides us with the exogenous variation needed to answer this question. Analyzing uniquely detailed loan application data, we find that application acceptance increases recipients’ income five years later by more than 10 percent compared to denied applicants. This effect is mostly driven by upward mobility of poor individuals, especially if credit-constrained, thereby reducing income inequality among those who get credit. Looking across various salient groups of applicants, we find that relatively constrained groups—that is, firms from low-income regions, new or high-growth firms, or female-owned firms—display higher responses to credit origination for their relatively poor applicants, while the effects for the rich applicants are at best negligible.

Keywords: credit constraints, income inequality, business loans, economic mobility, regression discontinuity design

JEL Classification: D31, E24, G21, O15

Suggested Citation

Delis, Manthos D. and Fringuellotti, Fulvia and Ongena, Steven R. G., Credit and Income Inequality (March 16, 2021). FRB of New York Staff Report No. 929, Rev. September 2023. Previous titles: “Credit, Income, and Inequality” and “Credit and Income”, Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: or

Manthos D. Delis

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312

Fulvia Fringuellotti (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

Steven R. G. Ongena

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000

NTNU Business School ( email )


Centre for Economic Policy Research (CEPR)

United Kingdom

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