Household Financial Practices and Wealth Mobility in the Era of Mass-participatory Finance and Growing Inequality

• In Event: 034 - Section on Economic Sociology Paper Session. Money, Credit and Society

Abstract

Since the 1980s, as Americans became increasingly involved in consumer finance, wealth inequality in the United States soared. Yet little research has examined whether and how household financial behavior is linked to wealth. Another limitation of previous scholarship is its typically fragmented focus on one aspect of financial behavior (mostly borrowing or investing). Using the Survey of Consumer Finances, this study extends prior scholarship in two primary ways: by analyzing a wide range of financial attitudes and behaviors and by examining how financial practices are related to wealth mobility, across social groups and over time. First, it identifies three distinctive patterns of use of financial products and services as well as financial prudency habits. Notably, financial practices remain stable over time. Second, household financial practices have distinctive effects on wealth mobility, above and beyond standard socio-economic variables usually considered in the inequality literature. The financial practices of the disadvantaged result in downward wealth mobility while the financial practices of the privileged may facilitate or inhibit upward wealth mobility, depending on the nature of involvement with consumer finance. The analyses span from the 1980s, when the trends of mass-participatory finance and growing wealth inequality had just initiated, to the late 2000s, when both trends were well underway. Together, the findings provide a unique description of household financial practices in the era of mass-participatory finance and point to their role in wealth mobility processes as a new mechanism of inequality.

Author

• Angelina Grigoryeva, Princeton University