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The Impact of Income Inequality on Household Indebtedness in Euro Area Countries

Stefan Jestl

No 173, wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw

Abstract: This paper examines the impact of income inequality on consumption-related household indebtedness at the household level. Using the first wave of the Eurosystem Household Finance and Consumption Survey data, the analysis sheds light on heterogeneous effects across euro area countries. The results suggest a positive impact of income inequality on consumption-related household indebtedness in a small sample of countries. We further employ a multilevel regression model to also take country’s macroeconomic characteristics into account, such as credit market and welfare state design. In this setting, we find an overall positive impact of income inequality on consumption-related household indebtedness. Disclaimer Funding from the Austrian Federal Ministry of Labour, Social Affairs, Health and Consumer Protection is gratefully acknowledged.

Keywords: Income Inequality; Keeping Up With The Joneses; Household Indebtedness; Euro Area (search for similar items in EconPapers)
JEL-codes: D12 D14 D31 (search for similar items in EconPapers)
Pages: 36 pages including 13 Tables and 2 Figures
Date: 2019-12
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