Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240517 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
IFN Working Paper No. 1374
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
Several studies have linked rising insolvency rates to increasing inequality and argued that this might be explained by individuals' desire to "Keep up with the Joneses". Using unique administrative register data on individual insolvencies in Sweden, I test whether the probability to become insolvent is related to inequality in one's reference group or to one's income distance relative to peers. Identification relies on area fixed effects, an extensive set of background characteristics and varying the definition of relevant reference groups. I find that there is a positive relationship between inequality and insolvency, where a 10 percent increase in top incomes increases the individual probability to become insolvent by 12 percent.
Subjects: 
Inequality
Insolvency
Bankruptcy
Financial distress
Social interaction
JEL: 
D14
D31
D63
D91
E21
Document Type: 
Working Paper

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