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Do rising top incomes fuel credit expansion?

Mehdi El Herradi and Aurélien Leroy
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Mehdi El Herradi: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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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)
Date: 2020-11
Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-03002536
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Published in Economics Letters, Elsevier, 2020, 196, pp.109539. ⟨10.1016/j.econlet.2020.109539⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03002536

DOI: 10.1016/j.econlet.2020.109539

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