Not Available for Download

Rising Household Debt: Its Causes and Macroeconomic Implications-A Long-Period Analysis

Posted: 17 Jan 2009  

Aldo Barba

University of Naples 'Federico II'

Massimo Pivetti

affiliation not provided to SSRN

Date Written: January 2009

Abstract

The article analyses the rise in household indebtedness from the point of view of its causes and long-run macroeconomic implications. The analysis is focussed on the US case. Differently from life-cycle interpretations of the phenomenon, and from interpretations in terms of erratic deviations of current income flows from their long-run trend, the rising household debt is viewed as the outcome of persistent changes in income distribution and growing income inequalities. Through household debt, low wages appear to have been brought to coexist with relatively high levels of aggregate demand, thus providing the solution to the contradiction between the necessity of high and rising consumption levels, for the growth of the system's actual output, and a framework of antagonistic conditions of distribution which keeps within limits the real income of the vast majority of society. The question of the long-run sustainability of this substitution of loans for wages is finally discussed.

Keywords: Household debt, Wages, Aggregate consumption, Saving rate, Income distribution

JEL Classification: D11, D14, E21, E25

Suggested Citation

Barba, Aldo and Pivetti, Massimo, Rising Household Debt: Its Causes and Macroeconomic Implications-A Long-Period Analysis (January 2009). Cambridge Journal of Economics, Vol. 33, Issue 1, pp. 113-137, 2009. Available at SSRN: https://ssrn.com/abstract=1327629 or http://dx.doi.org/10.1093/cje/ben030

Aldo Barba (Contact Author)

University of Naples 'Federico II'

via Cinthia, 4
Naples, Caserta 80126
Italy

Massimo Pivetti

affiliation not provided to SSRN

Paper statistics

Abstract Views
1,107