Do higher public and private debt levels benefit the wealthy? An empirical analysis of top wealth shares in the UK

Glauco De Vita; Yun Luo; Sandy Kyaw; Kexing Li

doi:10.1108/JES-07-2024-0458

Do higher public and private debt levels benefit the wealthy? An empirical analysis of top wealth shares in the UK

Glauco De Vita
, Yun Luo
, Sandy Kyaw
, Kexing Li

University of Southampton
Cardiff Metropolitan University

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

313 Downloads (Pure)

Abstract

Purpose - Despite the concomitant rise in recent decades in both debt levels (public as well as private) and wealth inequality, empirical evidence on the relationship is absent in existing literature. This is striking especially since recent theoretical contributions point to a link between debt and wealth inequality. We contribute to the debate by investigating empirically whether higher levels of UK public and household debt increase the UK wealth concentration at the top 1% and 10% of the wealth distribution.
Design/methodology/approach - We employ the Autoregressive Distributed Lag (ARDL) cointegration approach with UK time series data from 1970 to 2019. For robustness, a further analysis using panel data fixed effects estimation on a cross-country sample that also includes France and the USA, is undertaken. We also use bootstrapping to conservatively estimate statistical significance.
Findings - Higher levels of public and household debt are found to increase wealth concentration at the top 1% and 10%. The effect is stronger for household debt. Fixed effects estimation on a cross-country dataset supports the results for the UK.
Originality - This study is the first to investigate empirically whether rising levels of UK public and household debt benefit the wealthy and thus widen the gap between the ‘haves’ and ‘have-nots’.

Original language	English
Pages (from-to)	338-357
Number of pages	20
Journal	Journal of Economic Studies
Volume	51
Issue number	9
DOIs	https://doi.org/10.1108/JES-07-2024-0458
Publication status	Published - 18 Oct 2024

Bibliographical note

This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non commercial purposes), subject to full attribution to the original publication and authors.

Funder

The Leverhulme Trust for funding this research (RPG-2023-099)

Funding

The Leverhulme Trust for funding this research (RPG-2023-099)

Funders	Funder number
Leverhulme Trust	RPG-2023-099

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 10 Reduced Inequalities

Keywords

Wealth inequality
Top wealth shares
Public debt
Private debt
ARDL
Panel fixed effects

Access to Document

10.1108/JES-07-2024-0458Licence: CC BY

De Vita2024VORFinal published version, 862 KBLicence: CC BY

Cite this

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title = "Do higher public and private debt levels benefit the wealthy? An empirical analysis of top wealth shares in the UK",

abstract = "Purpose - Despite the concomitant rise in recent decades in both debt levels (public as well as private) and wealth inequality, empirical evidence on the relationship is absent in existing literature. This is striking especially since recent theoretical contributions point to a link between debt and wealth inequality. We contribute to the debate by investigating empirically whether higher levels of UK public and household debt increase the UK wealth concentration at the top 1\% and 10\% of the wealth distribution. Design/methodology/approach - We employ the Autoregressive Distributed Lag (ARDL) cointegration approach with UK time series data from 1970 to 2019. For robustness, a further analysis using panel data fixed effects estimation on a cross-country sample that also includes France and the USA, is undertaken. We also use bootstrapping to conservatively estimate statistical significance. Findings - Higher levels of public and household debt are found to increase wealth concentration at the top 1\% and 10\%. The effect is stronger for household debt. Fixed effects estimation on a cross-country dataset supports the results for the UK. Originality - This study is the first to investigate empirically whether rising levels of UK public and household debt benefit the wealthy and thus widen the gap between the {\textquoteleft}haves{\textquoteright} and {\textquoteleft}have-nots{\textquoteright}. ",

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N2 - Purpose - Despite the concomitant rise in recent decades in both debt levels (public as well as private) and wealth inequality, empirical evidence on the relationship is absent in existing literature. This is striking especially since recent theoretical contributions point to a link between debt and wealth inequality. We contribute to the debate by investigating empirically whether higher levels of UK public and household debt increase the UK wealth concentration at the top 1% and 10% of the wealth distribution. Design/methodology/approach - We employ the Autoregressive Distributed Lag (ARDL) cointegration approach with UK time series data from 1970 to 2019. For robustness, a further analysis using panel data fixed effects estimation on a cross-country sample that also includes France and the USA, is undertaken. We also use bootstrapping to conservatively estimate statistical significance. Findings - Higher levels of public and household debt are found to increase wealth concentration at the top 1% and 10%. The effect is stronger for household debt. Fixed effects estimation on a cross-country dataset supports the results for the UK. Originality - This study is the first to investigate empirically whether rising levels of UK public and household debt benefit the wealthy and thus widen the gap between the ‘haves’ and ‘have-nots’.

AB - Purpose - Despite the concomitant rise in recent decades in both debt levels (public as well as private) and wealth inequality, empirical evidence on the relationship is absent in existing literature. This is striking especially since recent theoretical contributions point to a link between debt and wealth inequality. We contribute to the debate by investigating empirically whether higher levels of UK public and household debt increase the UK wealth concentration at the top 1% and 10% of the wealth distribution. Design/methodology/approach - We employ the Autoregressive Distributed Lag (ARDL) cointegration approach with UK time series data from 1970 to 2019. For robustness, a further analysis using panel data fixed effects estimation on a cross-country sample that also includes France and the USA, is undertaken. We also use bootstrapping to conservatively estimate statistical significance. Findings - Higher levels of public and household debt are found to increase wealth concentration at the top 1% and 10%. The effect is stronger for household debt. Fixed effects estimation on a cross-country dataset supports the results for the UK. Originality - This study is the first to investigate empirically whether rising levels of UK public and household debt benefit the wealthy and thus widen the gap between the ‘haves’ and ‘have-nots’.

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Do higher public and private debt levels benefit the wealthy? An empirical analysis of top wealth shares in the UK

Abstract

Bibliographical note

Funder

Funding

UN SDGs

Keywords

Access to Document

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