Time-varying influence of household debt on inequality in United Kingdom

Edmond Berisha; David Gabauer; Rangan Gupta; Chi Keung Marco Lau

doi:10.1007/s00181-020-01940-1

Time-varying influence of household debt on inequality in United Kingdom

Edmond Berisha, David Gabauer, Rangan Gupta, Chi Keung Marco Lau

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

The United Kingdom (UK) in terms of income inequality is ranked among the highest in Europe. Likewise, within the last four decades, UK is characterized with drastic increases in household debt. In this paper, we analyze time-varying predictability of growth in household debt for growth in income (and consumption) inequality based on a high-frequency (quarterly) data set over 1975:Q2 to 2016:Q1. Results indicate that the growth in household debt has a strong predictive power, both for within and out-of-samples, on growth rate of income (and consumption) inequality in the UK. Interestingly, the strength of the predictive power is found to have increased after 2008. Based on time-varying impulse response functions, we also find that higher growth rate in household debt corresponds with subsequent increases in income inequality.

Original language	English
Pages (from-to)	1917-1933
Number of pages	17
Journal	Empirical Economics
Volume	61
Issue number	4
Early online date	20 Sep 2020
DOIs	https://doi.org/10.1007/s00181-020-01940-1
Publication status	Published - 1 Oct 2021

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title = "Time-varying influence of household debt on inequality in United Kingdom",

abstract = "The United Kingdom (UK) in terms of income inequality is ranked among the highest in Europe. Likewise, within the last four decades, UK is characterized with drastic increases in household debt. In this paper, we analyze time-varying predictability of growth in household debt for growth in income (and consumption) inequality based on a high-frequency (quarterly) data set over 1975:Q2 to 2016:Q1. Results indicate that the growth in household debt has a strong predictive power, both for within and out-of-samples, on growth rate of income (and consumption) inequality in the UK. Interestingly, the strength of the predictive power is found to have increased after 2008. Based on time-varying impulse response functions, we also find that higher growth rate in household debt corresponds with subsequent increases in income inequality.",

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note = "Funding Information: We would like to thank two anonymous referees for many helpful comments. However, any remaining errors are solely ours. Publisher Copyright: {\textcopyright} 2020, Springer-Verlag GmbH Germany, part of Springer Nature. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.",

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AU - Gupta, Rangan

AU - Lau, Chi Keung Marco

N1 - Funding Information: We would like to thank two anonymous referees for many helpful comments. However, any remaining errors are solely ours. Publisher Copyright: © 2020, Springer-Verlag GmbH Germany, part of Springer Nature. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.

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Time-varying influence of household debt on inequality in United Kingdom

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