Household borrowing not caused by income inequality, Richmond Fed paper argues

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A Federal Reserve Bank of Richmond working paper rebuts a popular hypothesis that the dramatic rise in household borrowing that preceded the financial crisis was prompted by low-income households borrowing in order to keep up with the consumption levels of higher-income households.

Using household-level data on debt accumulation during 2001–2012, Does greater inequality lead to more household borrowing? New evidence from household data by Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak an