Go to main navigation Navigation menu Skip navigation Home page Search

Friday Seminar - "Intergenerational Mobility and Credit" - Gordon Phillips (Tuck School of Business, Dartmouth College)

Gordon Phillips from Tuck School of Business, Dartmouth College will present his research at SSE main building (Room Aula) on Friday, May 26 at 10:30 CET.

Intergenerational Mobility and Credit

Abstract: To what extent – and through what channels – does parental credit access affect the future earnings of children? To answer this question, we combine the Decennial Census, credit reports, and administrative earnings records to create the first panel dataset linking parental credit access to the labor market outcomes of children in the U.S.We find that a 10% increase in parental unused revolving credit during their children’s adolescence (13 to 18 years old) is associated with 0.12% to 0.59% greater labor earnings of their children during early adulthood (25 to 30 years old), regardless of the educational attainment of the child or parent. We examine the mechanisms for this finding and show that increased parental credit access is associated with their children having higher rates of college graduation, fewer nonemployment spells, and a greater likelihood of working at higher paying firms. We then use our empirical elasticities to estimate a theory of intergenerational mobility with defaultable debt. The rise in credit access between the 1970s and 2000s increased the the intergenerational earnings elasticity and income variance of young adults. The expansion of credit has reduced intergenerational mobility and increased inequality as the largest increase in credit has occurred among high income households.

Read the paper

Dept. of Finance Friday seminars