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Do rising top incomes fuel credit expansion?

Mehdi El Herradi and Aurélien Leroy

Economics Letters, 2020, vol. 196, issue C

Abstract: This paper provides an empirical assessment of the effect of income inequality on credit dynamics in 12 advanced economies over the period 1948–2015. We use foreign Communist influence as an instrument to identify exogenous variation in inequality and estimate the dynamic effect of a top income shock on credit over GDP. The results suggest that the evolution of top incomes has persistent effects on credit expansion, especially for mortgage and business loans.

Keywords: Credit; Finance; Income inequality; Top income shares (search for similar items in EconPapers)
JEL-codes: D31 E25 E44 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:196:y:2020:i:c:s0165176520303268

DOI: 10.1016/j.econlet.2020.109539

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