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Income Inequality and Rising Household Debt - Evidence from Sweden

Abrahamson, Måns LU and Borgstrand, Freja LU (2016) NEKH02 20161
Department of Economics
Abstract
The purpose of this thesis is to examines the relationship between income inequality and level of indebtedness among the Swedish population. Using a relative consumption theory framework, the effect of income inequality on debt ratio and propensity to acquire debt above one’s ability is analyzed. Further, the sample is divided into two subgroupings to check if the effect is more profound in urban than rural areas. This is done through a cross-sectional analysis using municipality level data from 2014. The empirical findings support that income inequality has a strong positive effect on debt ratio as well as the notion of acquiring debt above one’s ability. The findings do not support a greater effect in urban areas, rather implying that... (More)
The purpose of this thesis is to examines the relationship between income inequality and level of indebtedness among the Swedish population. Using a relative consumption theory framework, the effect of income inequality on debt ratio and propensity to acquire debt above one’s ability is analyzed. Further, the sample is divided into two subgroupings to check if the effect is more profound in urban than rural areas. This is done through a cross-sectional analysis using municipality level data from 2014. The empirical findings support that income inequality has a strong positive effect on debt ratio as well as the notion of acquiring debt above one’s ability. The findings do not support a greater effect in urban areas, rather implying that the effect is greater in rural areas. Based on these findings, income inequality have undesirable effects and policies, such as taxation of luxury goods and a more progressive taxation system, can act to mitigate income inequality in the society. (Less)
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author
Abrahamson, Måns LU and Borgstrand, Freja LU
supervisor
organization
course
NEKH02 20161
year
type
M2 - Bachelor Degree
subject
keywords
Income inequality, Gini, Debt, Relative consumption theory
language
English
id
8882961
date added to LUP
2016-06-22 12:28:39
date last changed
2016-06-22 12:28:39
@misc{8882961,
  abstract     = {The purpose of this thesis is to examines the relationship between income inequality and level of indebtedness among the Swedish population. Using a relative consumption theory framework, the effect of income inequality on debt ratio and propensity to acquire debt above one’s ability is analyzed. Further, the sample is divided into two subgroupings to check if the effect is more profound in urban than rural areas. This is done through a cross-sectional analysis using municipality level data from 2014. The empirical findings support that income inequality has a strong positive effect on debt ratio as well as the notion of acquiring debt above one’s ability. The findings do not support a greater effect in urban areas, rather implying that the effect is greater in rural areas. Based on these findings, income inequality have undesirable effects and policies, such as taxation of luxury goods and a more progressive taxation system, can act to mitigate income inequality in the society.},
  author       = {Abrahamson, Måns and Borgstrand, Freja},
  keyword      = {Income inequality,Gini,Debt,Relative consumption theory},
  language     = {eng},
  note         = {Student Paper},
  title        = {Income Inequality and Rising Household Debt - Evidence from Sweden},
  year         = {2016},
}