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Rising Top Incomes And Increased Borrowing In The Rest Of The Distribution

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  • Jeffrey Thompson

Abstract

One potential consequence of rising top‐income concentration is borrowing by less‐affluent households attempting to maintain relative living standards. This paper evaluates the “keeping up with the Joneses” phenomenon, examining the responsiveness of payment‐to‐income ratios for different debt types across the income distribution to changes in income among affluent households. The analysis provides evidence for the responsiveness of debt to rising top incomes. Middle‐ and upper‐middle‐income households take on more housing‐related debt and have higher payments in places with higher top‐income levels. Among lower‐income households non‐mortgage borrowing and debt payments decline, consistent with restrictions in the supply of credit. (JEL D63, D14)

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  • Jeffrey Thompson, 2018. "Rising Top Incomes And Increased Borrowing In The Rest Of The Distribution," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 686-708, April.
    • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:2:p:686-708
    DOI: 10.1111/ecin.12520
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    References listed on IDEAS

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    Cited by:

    1. Mark Setterfield & Y.K. Kim, 2022. "How Financially Fragile can Households Become? Household Borrowing, the Welfare State, and Macroeconomic Resilience," Working Papers 2210, New School for Social Research, Department of Economics.
    2. Mark Setterfield & Yun K Kim, 2020. "Varieties of capitalism, increasing income inequality and the sustainability of long-run growth," Cambridge Journal of Economics, Oxford University Press, vol. 44(3), pages 559-582.

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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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