Household debt, expected economic conditions, and income inequality

Edmond Berisha, John Meszaros

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

The high level of debt among households outside the top end of the income distribution has led many economists to assert that household debt has been an important component of the increase in income inequality in the United States. In addition, the yield spread provides information about the overall condition of the economy and may also be tied into the distribution of income. The paper's results show that increases in the yield spread and household debt correspond with increases in top income shares, resulting in increases in income inequality. However, as household debt and income inequality increase, the yield spread contracts, which suggests future economic contraction. Thus, rising inequality may signal future economic weakness.

Original languageEnglish
Pages (from-to)283-295
Number of pages13
JournalInternational Journal of Finance and Economics
Volume23
Issue number3
DOIs
StatePublished - 1 Jul 2018

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Keywords

  • economic growth
  • household debt
  • income inequality

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