Working Paper No. 1374

Inequality, Relative Deprivation and Financial Distress: Evidence from Swedish Register Data

Published: December 10, 2020Pages: 45Keywords: Inequality; Insolvency; Bankruptcy; Financial distress; Social interactionJEL-codes: D14; D31; D63; D91; E21

Inequality, Relative Deprivation and Financial Distress: Evidence from Swedish Register Data Paula Roth

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.


Roth, Paula (2020). "Inequality, Relative Deprivation and Financial Distress: Evidence from Swedish Register Data". IFN Working Paper No. 1374. Stockholm: Research Institute of Industrial Economics (IFN).

Interdisciplinary European Studies

The European Union and the Return of the Nation State


This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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