EconPapers    
Economics at your fingertips  
 

Income Redistribution, Consumer Credit, and Keeping up with the Riches

Mathias Klein and Christopher Krause

No 1816, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In this study, we set up a DSGE model with upward looking consumption comparison and show that consumption externalities are an important driver of consumer credit dynamics. Our model economy is populated by two different household types. Investors, who hold the economy’s capital stock, own the firms and supply credit, and workers, who supply labor and demand credit to finance consumption. Furthermore, workers condition their consumption choice on the investors’ level of consumption. We estimate the model and find a significant keeping up-mechanism by matching business cycle statistics. In reproducing credit moments, our proposed model significantly outperforms a model version in which we abstract from consumption externalities.

Keywords: Income redistribution; consumer credit; relative consumption motive; business cycles (search for similar items in EconPapers)
JEL-codes: E21 E32 E44 (search for similar items in EconPapers)
Pages: 87 p.
Date: 2019
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.diw.de/documents/publikationen/73/diw_01.c.671150.de/dp1816.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:diw:diwwpp:dp1816

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().

 
Page updated 2020-07-10
Handle: RePEc:diw:diwwpp:dp1816