Household Debt

My dissertation focuses on the understudied role of banks in household finance, specifically examining household indebtedness.

Over the last three decades, households in developed countries have increasingly incurred a heavier debt burden. Although scholars in welfare and financial policy have explored the macro-historical reasons behind this increase in household debt, and those in social stratification have highlighted the disproportionate debt burden on racial minorities and low-income households, the critical role of banks has largely been neglected. This omission limits our understanding of the relationship between debt growth and stratification and our ability to address recent banking turmoils and the trend of overborrowing among these households.

To overcome these limitations, my dissertation, “Households in the Red: How Banking Organizations Drive Their Debt,” examines how banking organizations in the United States and other affluent democracies contribute to the growth and stratification of household debt, illuminating three critical organizational processes that exacerbate the increasing household debt in both the United States and affluent democracies: the concentration of commercial banks, the exclusion from bank account ownership, and the polarization in local banking systems.

Here are the three chapters of the dissertation:

1. In the Red: How Bank Concentration Fuels Debt Burden for Households, 1995–2019 (draft)

From 1995 to 2019, the average household debt burden in OECD countries increased from 71% to 127%. While financial deregulation and welfare retrenchment have been identified as key contributing factors, the impact of bank concentration on this trend has remained less understood. This study explores the contribution of bank concentration to household debt burden by analyzing data from the Luxembourg Wealth Study, covering over one million households across 16 affluent democracies during the same period. Results show that an increase in country-level bank concentration leads to a higher household-level debt burden. To uncover the mechanisms at play, I evaluate two hypotheses: market power and resource partitioning. Contrary to the expectations of the market power hypothesis, causal mediation analysis indicates that the relationship between bank concentration and household debt burden is not mediated by increased profitability in the banking sector. Instead, the evidence supports the resource partitioning theory, highlighting the significant role of nonbank financial organizations. Notably, the study finds that the non-housing debt burden of low-income households is particularly influenced by the proliferation of these organizations. This research sheds light on an overlooked driver of household indebtedness, illustrating an organizational process of debt-based accumulation that stratifies household wealth.

2. Banking the Unbanked Spurs Payday Loan Usage among Black Households (draft)

This study examines the impact of bank account ownership on racial disparities in the use of alternative financial services (AFS) such as nonbank check cashing, pawn shops, and payday lending. Using data from the National Survey of Unbanked and Underbanked Households (2015–2021), I employ causal decomposition analysis to investigate the counterfactual effect of banking the unbanked on AFS usage across racial groups. Findings reveal a complex relationship between bank account ownership and AFS usage. While increasing account ownership among the unbanked reduces racial gaps in nonbank check cashing and pawn shop loans, it paradoxically leads to increased payday loan usage among banked Black households. This trend persists even after controlling for local banking environments and state payday lending policies. The results suggest a distinct dual effect of owning bank accounts. On one hand, it substitutes for check cashing services and reduces the need for pawning items. On the other hand, bank account ownership, often a prerequisite for payday loans, may grant Black households with inadequate credit records more access to this alternative credit market. This research suggests that addressing both financial inclusion and the underlying causes of credit inequality is necessary, rather than simply focusing on banking the unbanked.

3. The Polarization in Local Banking Systems and Household Debt (work in progress)

My dissertation committee members include Jennie Brand (co-chair), Olav Sorenson (co-chair), David Brady, Kevan Harris, and Edward Walker.

This dissertation has won the American Sociological Association’s Doctoral Dissertation Research Improvement Grant, the UCLA Dissertation Year Fellowship, and the Taiwanese Overseas Pioneers Grant.