Rising Top Incomes and Increased Borrowing in the Rest of the Distribution

23 Pages Posted: 22 Feb 2018

See all articles by Jeffrey P. Thompson

Jeffrey P. Thompson

New England Public Policy Institute, Federal Reserve Bank of Boston; Federal Reserve Board of Governors

Date Written: April 2018

Abstract

One potential consequence of rising top‐income concentration is borrowing by less‐affluent households attempting to maintain relative living standards. This paper evaluates the “keeping up with the Joneses” phenomenon, examining the responsiveness of payment‐to‐income ratios for different debt types across the income distribution to changes in income among affluent households. The analysis provides evidence for the responsiveness of debt to rising top incomes. Middle‐ and upper‐middle‐income households take on more housing‐related debt and have higher payments in places with higher top‐income levels. Among lower‐income households non‐mortgage borrowing and debt payments decline, consistent with restrictions in the supply of credit.

JEL Classification: D63, D14

Suggested Citation

Thompson, Jeffrey P., Rising Top Incomes and Increased Borrowing in the Rest of the Distribution (April 2018). Economic Inquiry, Vol. 56, Issue 2, pp. 686-708, 2018, Available at SSRN: https://ssrn.com/abstract=3127890 or http://dx.doi.org/10.1111/ecin.12520

Jeffrey P. Thompson (Contact Author)

New England Public Policy Institute, Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Federal Reserve Board of Governors ( email )

Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/jeffrey-p-thompson.htm

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