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Intergenerational Linkages in Household Credit

Author

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  • Andra C. Ghent
  • Marianna Kudlyak

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.

Suggested Citation

  • Andra C. Ghent & Marianna Kudlyak, 2015. "Intergenerational Linkages in Household Credit," Working Paper 15-14, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:15-14
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    More about this item

    Keywords

    Household Finance; Intergenerational Mobility; Credit Constraints; Income Inequality;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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