Loans can have a significant impact on economic inequality. Here are some key points to consider:
1. Household Debt and Financial Crises: There is a link between income inequality, household indebtedness, and financial crises. While not formally modeled, research suggests that high levels of household debt can contribute to economic instability and crises .
2. Gentrification and Economic Inequality: Gentrification, which is associated with increased economic change, can also lead to greater economic inequality in cities. This is particularly evident in neighborhoods that were historically graded as hazardous or high-risk for lending purposes .
3. Micro and Retail Loans and Socio-Economic Inequality: In countries like Indonesia, micro and retail loans can contribute to socio-economic inequality. These loans, which make up a significant portion of total loans, can widen the wealth gap in societies with existing inequality .
4. Impact of Financing Schemes on Reducing Inequality: The impact of various financing schemes, including Islamic banking, on reducing inequality is not always positive. While Islamic banking can have positive effects on the real sector of the economy, it may not necessarily lead to declining inequality .
5. Racial Disparities in Loan Types: There are racial disparities in the types of loans individuals hold, which can contribute to economic inequality. For example, blacks are more likely to owe installment loans such as car and student loans, which tend to be more expensive than mortgages. The higher costs of debt payments can impede wealth accumulation and economic security for black families .
6. International Bank Flows and Income Inequality: International bank flows from lender countries can impact income inequality in borrower countries. A study found that these flows have an impact on income inequality in 74 countries over a specific period .
7. Views on Economic Inequality: Views on economic inequality vary across income groups. While adults across income groups are about equally likely to say there is too much economic inequality, upper- and middle-income Americans are more likely to say there is about the right amount of economic inequality. Views on economic inequality also vary within the two-party coalitions based on income levels .
8. Household Debt and Wage Share: Whenever consumption exceeds current income, households can borrow from the banking sector. This borrowing can impact the wage share and contribute to income inequality .
9. Student Loans and the Racial Wealth Divide: Student loans can contribute to the racial wealth divide. Disagreements exist regarding the extent of the student debt problem and its relationship with income. However, focusing solely on income can lead to incorrect assumptions about the ability to repay student loans. Canceling student debt is sometimes seen as regressive, but it is important to consider the broader impact on wealth inequality .
10. Income Inequality and Economic Growth: Income inequality can have an impact on economic growth. Research suggests that higher levels of income inequality can hinder economic growth and development.