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Do rising top incomes fuel credit expansion?

Author

Listed:
  • Mehdi El Herradi

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Aurélien Leroy

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

Abstract

This paper provides an empirical assessment of the effect of income inequality on credit dynamics in 12 advanced economies over the period 1948-2015. We use foreign Communist influence as an instrument to identify exogenous variation in inequality and estimate the dynamic effect of a top income shock on credit over GDP. The results suggest that the evolution of top incomes has persistent effects on credit expansion, especially for mortgage and business loans.

Suggested Citation

  • Mehdi El Herradi & Aurélien Leroy, 2020. "Do rising top incomes fuel credit expansion?," Post-Print hal-03002536, HAL.
    • Handle: RePEc:hal:journl:hal-03002536
    DOI: 10.1016/j.econlet.2020.109539
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    Cited by:

    1. Bazillier, Rémi & Héricourt, Jérôme & Ligonnière, Samuel, 2021. "Structure of income inequality and household leverage: Cross-country causal evidence," European Economic Review, Elsevier, vol. 132(C).
    2. Herradi, Mehdi El & Leroy, Aurélien, 2022. "The rich, poor, and middle class: Banking crises and income distribution," Journal of International Money and Finance, Elsevier, vol. 127(C).
    3. Abebe Hailemariam & Sefa Awaworyi Churchill & Russell Smyth & Kingsley Tetteh Baako, 2021. "Income inequality and housing prices in the very long‐run," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 295-321, July.

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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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