Disparities in financial wellbeing and access to credit mean that the poor, compared to the non-poor, are more likely to borrow at higher interest rates and use higher-interest credit products such as payday loans. They are also more likely to be liquidity-constrained, have limited access to formal credit, have bills designated for third-party collection, and be categorized as high-risk or sub-prime borrowers. These differences in credit access and use can significantly impact the wellbeing of low-income individuals and impede their ability to invest in their future and the future of their children.
So far no studies have evaluated the extent to which the neighborhood environment shapes the financial behavior and credit market use of low-income individuals. Cindy Soo and Sarah Miller suggest several reasons why neighborhoods might matter, including peer effects, the availability of financial information, and access to mainstream financial institutions. In their study, they will evaluate the role of neighborhood environment on financial wellbeing and credit use by analyzing the financial outcomes of participants of the Moving to Opportunity (MTO) experiment.