Relative Income and Indebtedness: Evidence from Panel Data

Michael Carr and Arjun Jayadev

No 2013_02, Working Papers from University of Massachusetts Boston, Economics Department

Abstract: We examine patterns of indebtedness in the Panel Study of Income Dynamics, focusing on the period surrounding the housing bubble and its aftermath (i.e. 1999-2009). Leverage increased most quickly among lower income households during this period. We findnd that leverage grew faster for households with lower relative income compared to other households in similar demographic groups. We also find that changes in leverage for a given household were strongly associated with lower relative income within a state, controlling for own income. A one standard deviation increase in relative income is associated with a 50 to 100 percent increase in the growth in leverage. Together, these findings provide evidence for the thesis that the rising indebtedness of households in the U.S is related to high levels of inequality, and that `Veblen effects' whereby relative income matters for individual well-being and decisions may contribute to rising household indebtedness.

Pages: 28 pages
Date: 2013-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://repec.umb.edu/RePEc/files/2013_02.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mab:wpaper:2013_02

Access Statistics for this paper

More papers in Working Papers from University of Massachusetts Boston, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Harry Konstantinidis ().