Falling Behind: Has Rising Inequality Fueled the American Debt Boom?
Moritz Drechsel-Grau and
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Moritz Drechsel-Grau: University of Mannheim
Fabian Greimel: University of Mannheim
No 1032, 2018 Meeting Papers from Society for Economic Dynamics
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.
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:1032
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