Time-Varying Influence of Household Debt on Inequality in United Kingdom

Edmond Berisha (), David Gabauer, Rangan Gupta and Chi Keung Lau
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Edmond Berisha: Feliciano School of Business, Montclair State University, Montclair, NJ 07043, USA

No 202017, Working Papers from University of Pretoria, Department of Economics

Abstract: The United Kingdom (UK) in terms of income inequality is ranked among the highest in Europe. Likewise, within the last four decades, UK is characterized with drastic increases in household debt. In this paper, we analyze time-varying predictability of growth in household debt for growth in income (and consumption) inequality based on a high-frequency (quarterly) data set over 1975:Q2 to 2016:Q1. Results indicate that the growth in household debt has a strong predictive power, both for within and out-of-samples, on growth rate of income (and consumption) inequality in the UK. Interestingly, the strength of the predictive power is found to have increased after 2008. Based on time-varying impulse response functions, we also find that higher growth rate in household debt corresponds with subsequent increases in income inequality.

Keywords: Household Debt; Inequality; Time-Varying Predictions (search for similar items in EconPapers)
JEL-codes: C32 C53 D63 E30 E40 G51 R31 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2020-02
New Economics Papers: this item is included in nep-eur and nep-mac
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Citations: View citations in EconPapers (3)

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Journal Article: Time-varying influence of household debt on inequality in United Kingdom (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202017

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