The Impact of Income Inequality on Household Indebtedness in Euro Area Countries
wiiw Working Paper No. 173, December 2019
36 pages including 13 Tables and 2 Figures
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
JEL classification: D12, D14, D31
Countries covered: Euro Area
Research Areas: Labour, Migration and Income Distribution