Inequality, Relative Deprivation and Financial Distress: Evidence from Swedish Register Data

Paula Roth

No 1374, Working Paper Series from Research Institute of Industrial Economics

Abstract: Several studies have linked rising insolvency rates to increasing inequality and argued that this might be explained by individuals’ desire to “Keep up with the Joneses”. Using unique administrative register data on individual insolvencies in Sweden, I test whether the probability to become insolvent is related to inequality in one’s reference group or to one’s income distance relative to peers. Identification relies on area fixed effects, an extensive set of background characteristics and varying the definition of relevant reference groups. I find that there is a positive relationship between inequality and insolvency, where a 10 percent increase in top incomes increases the individual probability to become insolvent by 12 percent.

Keywords: Inequality; Insolvency; Bankruptcy; Financial distress; Social interaction (search for similar items in EconPapers)
JEL-codes: D14 D31 D63 D91 E21 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2020-12-10
New Economics Papers: this item is included in nep-eur and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1374

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