Relative income and indebtedness: evidence from panel data

Carr, Michael D. and Jayadev, Arjun (2014) Relative income and indebtedness: evidence from panel data. Review of Income and Wealth, 61 (4). pp. 759-772. ISSN 00346586

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We examine patterns of indebtedness in the Panel Study of Income Dynamics, focusing on the period surrounding the housing bubble and its aftermath (i.e., 1999–2009). Leverage increased across households, but most quickly among lower income households during this period. We find additionally that leverage grew faster for households with lower relative income compared to other households in similar demographic groups or within a state controlling for own income. Together, these findings provide evidence for the thesis that the rising indebtedness of households in the U.S. is related to high levels of inequality, and that “Veblen effects,” whereby relative income matters for individual well‐being and decisions, may contribute to rising household indebtedness.

Item Type: Article
Authors: Carr, Michael D. and Jayadev, Arjun
Document Language:
Uncontrolled Keywords: Income, Wealth, Data
Subjects: Social sciences > Economics > Macroeconomics & related topics
Divisions: Azim Premji University > Research Centre > Centre for Local Democracy
Full Text Status: Restricted
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