The Distribution of Household Debt in the United States, 1950-2019

Alina K. Bartscher (), Moritz Kuhn, Moritz Schularick and Ulrike I. Steins ()
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Alina K. Bartscher: Frankfurt School of Finance and Management
Ulrike I. Steins: Evonauts GmbH

No 15, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrow-ing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their in-come growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. housing debt between the 1980s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctu-ations and turned the American middle class into the epicenter of growing financial fragility.

Keywords: household debt; inequality; household portfolios; financial fragility (search for similar items in EconPapers)
JEL-codes: D14 D31 E21 E44 (search for similar items in EconPapers)
Pages: 86 pages
Date: 2020-07
New Economics Papers: this item is included in nep-his, nep-mac and nep-pke
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Citations: View citations in EconPapers (27)

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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_015_2020.pdf Second version, 2023 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:015

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