The Emergence of a Finance Culture in American Households, 1983-2010

This research project seeks to understand the linkages between the changes in the financial economy and the behavior of households in the real economy.

The financial economy has expanded since 1980, in part by selling more products to individuals and households, such as mortgages, second mortgages, mutual funds, student loans, car loans, insurance, and various forms of retirement products. This giant expansion of the financial services sector occurred at the same time that income inequality and job insecurity increased dramatically in the US. As a result, this project teases out empirically the relationship between these trends by examining data on the activities of households over the past 30 years. On the one hand, the expansion of credit would seem to be one way that households coped with stagnant incomes by borrowing more money. On the other, people with the lowest incomes were not good credit risks, and the households most likely to embrace the new financial culture were those with the most means. At its core, this project seeks to understand how households did or did not come to take control over their finances in the face of growing income inequality and job insecurity over the past 30 years.