@TechReport{iza:izadps:dp7910,
            	author={Coibion, Olivier and Gorodnichenko, Yuriy and Kudlyak, Marianna and Mondragon, John},
            	title={Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data},
            	year={2014},
	month={Jan},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={7910},
            	url={https://www.iza.org/publications/dp7910},
	abstract={One suggested hypothesis for the dramatic rise in household borrowing that preceded the financial crisis is that low-income households increased their demand for credit to finance higher consumption expenditures in order to "keep up" with higherincome households. Using household level data on debt accumulation during 2001-2012, we show that low-income households in high-inequality regions accumulated less debt relative to income than their counterparts in lower-inequality regions, which negates the hypothesis.
We argue instead that these patterns are consistent with supply-side interpretations of debt accumulation patterns during the 2000s. We present a model in which banks use applicants' incomes, combined with local income inequality, to infer the underlying type of the applicant, so that banks ultimately channel more credit toward lower-income applicants in low-inequality regions than high-inequality regions. We confirm the predictions of the model using data on individual mortgage applications in high- and low-inequality regions over this time period.},
	keywords={Great Recession;household debt;inequality},
            }