Expenditure Cascades

Levine, Adam Seth; Frank, Robert H.; Dijk, Oege

doi:10.2139/ssrn.1690612

Cited by 52 publications

(43 citation statements)

References 24 publications

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“…their consumption relative to peer groups (including aspirational benchmark groups with somewhat higher incomes), rising incomes at the top of the distribution could lead to "expenditure cascades" where households further down the distribution increase their spending to maintain their relative status (Levine, Frank, and Dijk, 2010). Alternatively, rising top incomes could lead to a rising supply of "rich" goods in a market or rising prices for supplyconstrained good and services, both of which could result in higher levels of consumption and debt among households across the rest of the distribution.…”

Section: The Influence Of Inequality On Consumption and Debtmentioning

confidence: 99%

Do Rising Top Incomes Lead to Increased Borrowing in the Rest of the Distribution?

Thompson

2016

FEDS

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Abstract:One potential consequence of rising concentration of income at the top of the distribution is increased borrowing, as less affluent households attempt to maintain standards of living with less income. This paper explores the "keeping up with the Joneses" phenomenon using data from the Survey of Consumer Finances. Specifically, it examines the responsiveness of payment-toincome ratios for different debt types at different parts of the income distribution to changes in the income thresholds at the 95 th and 99 th percentiles. The analysis provides some evidence indicating that household debt payments are responsive to rising top incomes. Middle and uppermiddle income households take on more housing-related debt and have higher housing debt payment to income ratios in places with higher top income levels. Among households at the bottom of the income distribution there is a decline in non-mortgage borrowing and debt payments in areas with rising top-income levels, consistent with restrictions in the supply of credit. The analysis also consistently shows that 95 th percentile income has a greater influence on borrowing and debt payment across in the rest of the distribution than the more affluent 99 th percentile level.

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Section: The Influence Of Inequality On Consumption and Debtmentioning

confidence: 99%

Do Rising Top Incomes Lead to Increased Borrowing in the Rest of the Distribution?

Thompson

2016

FEDS

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“…See also the working paper by Levine, Frank, and Dijk (2010), which looks at the effects of income inequality on "expenditure cascades" and finds that the US counties with the highest levels of income inequality were the most likely to experience financial distress.…”

Section: Appendix B | 245mentioning

confidence: 99%

Equity, Growth, and Community: What the Nation Can Learn from America's Metro Areas

Benner

Pastor

2015

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“…Status is a relative concept, and if everyone's consumption level increases equally, then status is unchanged even as environmental impacts worsen [80]. Furthermore, as the rich increase their consumption of status goods, everyone else will feel worse off, and people may make important sacrifices of their own well-being in other areas in order to maintain their status [81][82][83][84]. Humans are other-regarding in envy as well as fairness.…”

Section: Are People Insatiable?mentioning

confidence: 99%

Seeking Consilience for Sustainability Science: Physical Sciences, Life Sciences, and the New Economics

Farley

2014

CiS

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Abstract:The human system, driven largely by economic decisions, has profoundly affected planetary ecosystems as well as the energy supplies and natural resources essential to economic production. The challenge of sustainability is to understand and manage the complex interactions between human systems and the rest of nature. This conceptual article makes the case that meeting this challenge requires consilience between the natural sciences, social sciences and humanities, which is to say that their basic assumptions must be mutually reinforcing and consistent. This article reviews the extent to which economics is pursuing consilience with the sciences of human behavior, physics and ecology, and the impact full consilience would have on the field. The science of human behavior would force economists to redefine what is desirable, while physics and ecology redefine what is possible. The challenges posed by ecological degradation can be modeled as prisoner's dilemmas, best solved through cooperation, not competition. Fortunately, science reveals that humans may be among the most cooperative of all species. While much of the mainstream economic theory that still dominates academic and the policy discourse continues to ignore important findings from other sciences, several sub-fields of economics have made impressive strides towards consilience in recent decades, and these are likely to change mainstream theory eventually. The question is whether these changes can proceed rapidly enough to solve the most serious problems we currently face.

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Expenditure Cascades

Cited by 52 publications

References 24 publications

Do Rising Top Incomes Lead to Increased Borrowing in the Rest of the Distribution?

Do Rising Top Incomes Lead to Increased Borrowing in the Rest of the Distribution?

Equity, Growth, and Community: What the Nation Can Learn from America's Metro Areas

Seeking Consilience for Sustainability Science: Physical Sciences, Life Sciences, and the New Economics

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