The Saving Glut of the Rich and the Rise in Household Debt

Citation:

Atif Mian, Ludwig Straub, and Amir Sufi. Working Paper. “The Saving Glut of the Rich and the Rise in Household Debt”.
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Abstract:

Rising income inequality since 1980 in the United States has generated a large increase in saving by the top of the income distribution, which we call the saving glut of the rich. The saving glut of the rich has been on the same order of magnitude as the global saving glut, and it has not been associated with an increase in investment. An examination of the distribution of income and wealth reveals that a large fraction of the rise in household borrowing by non-rich households has been financed by rich households through this saving glut. Analysis using variation across states in the rise in top income shares shows that income growth at the top of the income distribution can explain 75% of the accumulation of household debt held as a financial asset by households in the United States. After the Great Recession, evidence suggests that the saving glut of the rich has been financing government deficits to a greater degree.

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Last updated on 04/01/2020