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:
- 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.
- Banking Without Banks: How Bank Account Ownership Influences Racial Disparities in Alternative Financial Services (draft)
Racial minorities, often sidelined by traditional financial systems, are a primary demographic for alternative financial services (AFS). While promoting financial inclusion is seen as a way to address racial disparities in the use of AFS, this claim is often complicated by selection and post-treatment biases. Drawing on data from the National Survey of Unbanked and Underbanked Households (2015–2019) with over one hundred thousand households and adopting causal decomposition analysis, this study investigates the effect of bank account ownership on racial disparities in three AFS channels: payday lending, pawn shop loans, and check cashing. Results confirm that Black and Hispanic households are more inclined to use these AFS compared to their White counterparts. Notably, the results uncover a distinct impact of hypothetically increased bank account ownership for unbanked households. While it decreases the reliance on nonbank check cashing among banked racial minority households, it paradoxically escalates payday loan usage within Black households when they become banked. These results suggest that while expanding bank account ownership can reduce certain AFS dependencies, it inadvertently perpetuates a form of exclusive inclusion that leads more financially included Black households to opt for payday loans.
- The Polarization in Local Banking Systems and Household Debt
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.
