Association for Public Policy Analysis & Management

One potential consequence of the 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-to-income ratios for different debt types at different parts of the income distribution to changes in the income thresholds at the 90th and 99th percentiles. The analysis provides some evidence indicating that household debt payments are responsive to rising top incomes. The effect, however, is primarily concentrated among middle and upper-middle income households, and is largely isolated to housing-related debt.