Loading...
Please wait, while we are loading the content...
Similar Documents
Between Groups Inequality, “Debt for Status” and Financial Innovations Why Do the Poorer Borrow So Much?
| Content Provider | Semantic Scholar |
|---|---|
| Author | Bellet, Clément S. |
| Copyright Year | 2013 |
| Abstract | The income gap between two groups belonging to the same generation, as evidenced in the rise in top-income shares observed over the last decades, may affect lower income groups preferences over different types of goods and their attitude towards debt. Following John Maynard Keynes in A Treatise on Money (1930), the needs of human beings fall into two classes: “those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction makes us feel superior to our fellows”. The observed boom in consumption in periods of increasing inequalities may be partly explained by individuals keeping up with the Joneses on visible consumption, which also tend to be more durable. I set up a simple two-periods life-cycle/permanent income model with credit and income heterogeneity between a reference and a reference-dependent group. I show under which conditions a “borrowing for status” effect exists in partial and general equilibrium. Financial innovations, modeled as an exogenous fall in interest rate, will have an ambiguous impact depending on the possibility to substitute between relative and absolute needs. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://econ.sciences-po.fr/sites/default/files/file/Preliminary%20Draft_Latest%20version.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
