Borrow to Be the Poor or the Rich? It Depends : Credit Market and Wealth Accumulation

We investigate the relationship between access to credit and wealth accumulation. Empirical results suggest an asymmetric heterogeneity over the whole range of wealth distribution. There is a significantly negative relationship between household debt and wealth accumulation for poor households but a significantly positive relationship for wealthy households. Further, we categorize the loans by purpose into loans for investment and consumption and examine how investment loans work. We find wealthy households could better benefit from the investment debt, but poor households fail. We also find that a higher ratio of investment loans to total loans would help households to achieve better wealth accumulation. We discuss the two channels of entrepreneurship and investment behaviors