Falling Behind: Has Rising Inequality Fueled the American Debt Boom?

Moritz Drechsel-Grau and Fabian Greimel
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Moritz Drechsel-Grau: University of Mannheim

No 1032, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We investigate the prevailing view that unequal growth combined with social comparisons have driven the boom of US household debt in the decades before the Great Recession. Thereby, non-rich households try to keep up with the rising living standards of the rich. We first develop a tractable infinite-horizon consumption network model in order to illustrate the mechanism analytically. We then introduce social comparisons into a heterogeneous agents macroeconomic model with housing and heterogeneous income profiles for a quantitative analysis.

Date: 2018
New Economics Papers: this item is included in nep-dge and nep-ure
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Citations: View citations in EconPapers (2)

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Working Paper: Falling Behind: Has Rising Inequality Fueled the American Debt Boom? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:1032

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