Resource title

Keeping up with the Joneses: the effect of income inequality on demand for consumer credit (RV 2002/84/MKT)

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The provision of financing options to stimulate consumption has become a pervasive and important strategic marketing tool. While many firms are increasingly deriving more profit from financing than selling products, this has coincided with an increase in household debt relative to disposable personal income from about 60% in 1980 to 90% in 2000. Using quarterly US data for 1980-2000, the authors empirically examine the effect of income inequality on debt relative to disposable personal income and find a strong effect. They argue that rising income inequality induces households with smaller gains to increase borrowing to maintain social position.

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en

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application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2003/2003-67.pdf

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Copyright INSEAD. All rights reserved