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When Your Word Is Not Enough: Race, Collateral, and Household Credit

Published online by Cambridge University Press:  03 March 2009

Martha L. Olney
Martha L. Olney
Affiliation:
Visiting Associate Professor of Economics, Department of Economics, 549 Evans Hall #3880, University of California, Berkeley, CA 94720-3880.
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Abstract

Black families included in the 1918/19 BLS Consumer Purchases Survey used installment credit more frequently and merchant credit less frequently than White families. Economic and demographic characteristics explain the racial difference for installment but not for merchant credit. I argue greater demand for installment credit by Black families was satisfied because repossession of collateral upon buyer default overcame merchants' personal prejudice with regard to creditworthiness, but absence of tangible collateral impacted the availability of merchant credit. Low use of merchant credit can account for relatively high interwar saving rates for low-income Black families.

Type
Articles
Information
The Journal of Economic History , Volume 58 , Issue 2 , June 1998 , pp. 408 - 431
Copyright
Copyright © The Economic History Association 1998

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