Structure of Income Inequality and Household Leverage: Theory and Cross-Country Evidence

Remi Bazillier, Jérôme Héricourt and Samuel Ligonnière ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: How does income inequality and its structure affect credit? We extend the theoretical framework by Kumhof et al. (2015) to distinguish between upper, middle and low-income classes, and show that most of the positive impact of inequality on credit predicted by Kumhof et al. (2015) should be driven by the share of total output owned by the middle classes. Consistently, this impact should weaken in countries where financial markets are insufficiently developed. These theoretical predictions are empirically confirmed by a study based on a 41-country dataset over the period 1970-2014, where exogenous variations of inequality are identified with a new instrument variable, the total number of ILO conventions signed at the country-level

Keywords: Credit; Finance; Income Inequality; Inequality structure (search for similar items in EconPapers)
JEL-codes: D31 E25 E44 G01 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2019-02
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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ftp://mse.univ-paris1.fr/pub/mse/CES2019/19005.pdf (application/pdf)

Related works:
Journal Article: Structure of income inequality and household leverage: Cross-country causal evidence (2021)
Working Paper: Structure of income inequality and household leverage: Cross-country causal evidence (2021)
Working Paper: Structure of Income Inequality and Household Leverage: Theory and Cross-Country Evidence (2019)
Working Paper: Structure of Income Inequality and Household Leverage: Theory and Cross-Country Evidence (2019)
Working Paper: Structure of Income Inequality and Household Leverage: Theory and Cross-Country Evidence (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:19005

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