Subprime lending and financial inequality in an agent-based model

Andrea Teglio; Silvano Cincotti; Einar Jon Erlingsson; Marco Raberto; Hlynur Stefansson; Jon Thor Sturluson

doi:10.1007/978-3-319-00912-4_5

Subprime lending and financial inequality in an agent-based model

Andrea Teglio^*, Silvano Cincotti, Einar Jon Erlingsson, Marco Raberto, Hlynur Stefansson, Jon Thor Sturluson

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

Real estate bubbles often trigger financial and economic crisis. U.S. subprime mortgage crisis and the Spanish property bubble, both occurring in 2008, are recent examples whose consequences are still affecting the respective economies. The aim of this paper is to understand if the level of concentration of financial capital has an impact on the real estate bubble formation. We study the issue in a first scenario where mortgage loans are easily granted (subprime mortgages) and in second one with a stricter regulation for the access to credit. Our results show that the combination of capital concentration and easy access to credit gives rise to a strong economic instability and to a highly unequal distribution of wealth.

Original language	English
Pages (from-to)	55-67
Number of pages	13
Journal	Lecture Notes in Economics and Mathematical Systems
Volume	669
DOIs	https://doi.org/10.1007/978-3-319-00912-4_5
Publication status	Published - 2014

Bibliographical note

Funding Information:
The authors would like to acknowledge the financial support of the Icelandic Center for Research (RANNIS), grant no. 110653021. AT also acknowledges projets GV/2012/045 of the Generalitat Valenciana, project Bancaja P11A2010-17, and the Spanish national project ECO2011-23634.

Publisher Copyright:
© Springer International Publishing Switzerland 2014

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10.1007/978-3-319-00912-4_5

Cite this

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title = "Subprime lending and financial inequality in an agent-based model",

abstract = "Real estate bubbles often trigger financial and economic crisis. U.S. subprime mortgage crisis and the Spanish property bubble, both occurring in 2008, are recent examples whose consequences are still affecting the respective economies. The aim of this paper is to understand if the level of concentration of financial capital has an impact on the real estate bubble formation. We study the issue in a first scenario where mortgage loans are easily granted (subprime mortgages) and in second one with a stricter regulation for the access to credit. Our results show that the combination of capital concentration and easy access to credit gives rise to a strong economic instability and to a highly unequal distribution of wealth.",

author = "Andrea Teglio and Silvano Cincotti and Erlingsson, {Einar Jon} and Marco Raberto and Hlynur Stefansson and Sturluson, {Jon Thor}",

note = "Funding Information: The authors would like to acknowledge the financial support of the Icelandic Center for Research (RANNIS), grant no. 110653021. AT also acknowledges projets GV/2012/045 of the Generalitat Valenciana, project Bancaja P11A2010-17, and the Spanish national project ECO2011-23634. Publisher Copyright: {\textcopyright} Springer International Publishing Switzerland 2014",

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AU - Teglio, Andrea

AU - Cincotti, Silvano

AU - Erlingsson, Einar Jon

AU - Raberto, Marco

AU - Stefansson, Hlynur

AU - Sturluson, Jon Thor

N1 - Funding Information: The authors would like to acknowledge the financial support of the Icelandic Center for Research (RANNIS), grant no. 110653021. AT also acknowledges projets GV/2012/045 of the Generalitat Valenciana, project Bancaja P11A2010-17, and the Spanish national project ECO2011-23634. Publisher Copyright: © Springer International Publishing Switzerland 2014

PY - 2014

Y1 - 2014

N2 - Real estate bubbles often trigger financial and economic crisis. U.S. subprime mortgage crisis and the Spanish property bubble, both occurring in 2008, are recent examples whose consequences are still affecting the respective economies. The aim of this paper is to understand if the level of concentration of financial capital has an impact on the real estate bubble formation. We study the issue in a first scenario where mortgage loans are easily granted (subprime mortgages) and in second one with a stricter regulation for the access to credit. Our results show that the combination of capital concentration and easy access to credit gives rise to a strong economic instability and to a highly unequal distribution of wealth.

AB - Real estate bubbles often trigger financial and economic crisis. U.S. subprime mortgage crisis and the Spanish property bubble, both occurring in 2008, are recent examples whose consequences are still affecting the respective economies. The aim of this paper is to understand if the level of concentration of financial capital has an impact on the real estate bubble formation. We study the issue in a first scenario where mortgage loans are easily granted (subprime mortgages) and in second one with a stricter regulation for the access to credit. Our results show that the combination of capital concentration and easy access to credit gives rise to a strong economic instability and to a highly unequal distribution of wealth.

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Subprime lending and financial inequality in an agent-based model

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