Research On The Impact Of Debt On Family Inequality

The report of the Nineteenth National Congress clearly pointed out that what we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.Household economic inequality is one of the important factors affecting people’s imbalance and underdevelopment.Some scholars have shown that financial development is an essential part of economic development,but there is no comprehensive and systematic study on the relationship between financial development and economic inequality.This article focuses on household economic inequality from the perspective of debt.The widening income gap and wealth gap have seriously affected the balanced development of our society.With the transition of economic development stage,income inequality has become an important factor restricting the high-quality development of our economy.At the same time,debt levels in the household sector have been rising in recent years.Since the implementation of the supply-side reforms in 2015,the growth rate of local government and corporate sector leverage has slowed significantly,but the leverage of the household sector has continued to rise.Therefore,the study of household economic inequality from the perspective of debt has become an economic phenomenon that cannot be ignored.However,the economic inequality(income,wealth,and consumption)that households faced is closely related,but in the existing research,these parts have been in a fragmented state for a long time.The existing research only estimates one of the aspects.At the same time,most of the literatures focus on the impact of credit on the economic level,such as income and consumption,but ignore the impact of debt on household economic disparities,including income disparities,consumption disparities,and wealth disparities.At present,China’s basic contradictions have changed.From the perspective of debt,it is of great practical significance to provide policy recommendations to reduce household imbalances and underdevelopment.On the other hand,as the largest developing country,China can provide useful policy references for new developing countries.Based on literature review and theoretical models,this paper uses the World Bank’s country-level data,provincial-level data,and China Household Financial Survey data.The analysis focuses on the following issues at the macro and micro level: First,What is the trend of economic inequality and private sector credit around the world over the past three decades?At a macro level,does private sector credit have an impact on wealth inequality and income inequality in countries? Second,what are the current trends in China’s household economic inequality and private sector credit? At the provincial level,explore whether Chinese household debt has a significant impact on income inequality,consumption inequality,and wealth inequality? Third,at the micro level,why does household debt affect economic inequality?? The systematic answer to the above questions constitutes the analysis framework and research ideas of this article to investigate the impact of debt on household economic inequality.Based on the research of the above issues,this article has the following findings: First,the proportion of private sector credit is rising.According to the World Bank’s statistics from 118 countries from 1960 to 2018,the ratio of average private credit to GDP in all countries rose from 16.66% in 1960 to 87.29% in 2017.The proportion and growth rate of China’s private credit in GDP is much higher than the world average,and also higher than developed and developing countries.The proportion of wealth and income of the highest 1% and the highest10% gradually increased,while the proportion of the middle 40% gradually decreased,and the wealth gap became larger and larger than the level of income inequality.At the macro level,empirical results show that debt significantly widens a country’s income gap and wealth gap.Second,according to data from the China Household Finance Survey and provincial statistical yearbooks,the average amount of debt owned by the household sector has continued to increase,and the average debt scale has increased from 27,100 yuan in 2011 to 2019.59,500 yuan in the year.By region,the debt level of Chinese households is high in the eastern part of the country,and the growth rate is fastest in the western part.Through empirical research,it is found that at the provincial level,debt not only widens the income gap and wealth gap,but also expands the consumption gap between households.Third,at the micro level,the reason analysis found that household debt significantly increased the income of higher endowment groups,high-income groups were more likely to obtain credit for investment and management,and low-income groups were more likely to use credit for consumption,thereby exacerbating widening income inequality.Owning debt and the amount of debt significantly increase household consumption.The quantile regression results show that as the quantile of consumption increases,household consumption levels gradually increase,further explaining that debt has a smaller impact on the consumption of low-consumption households,and has a greater effect on the consumption of high-consumption households.According to the classification and regression of debt types,it was found that the suppression of housing debt increased the consumption level of low-wealth households,and the operating debt significantly increased the consumption level of high-wealth households,while low-wealth households have more rigid debt needs,high wealth households have more investment debts,so debts have exacerbated the consumption gap between the two groups.Household ownership and amounts of debt significantly increase wealth accumulation level.The quantile regression results show that debt has a significant impact on middle-and high-wealth households.It further shows that debt has a smaller impact on low-wealth households and a greater effect on high-wealth households,thereby expanding the wealth gap between households.The research conclusions of this article are helpful to provide reference for relevant departments to formulate policies.