“They found that poor households didn’t borrow more in high-inequality areas. Instead, poor households borrowed more in poorer areas (i.e.: areas with less overall inequality). In short, it’s the opposite of what the keeping-up-with-the-Joneses effect would predict. Poor households borrowed more when they had poor neighbors, not rich neighbors.”
Something I like to do is look at US news stories and look at them in a Canadian context.
In the table below I look at income inequality levels in the Canadian provinces in contrast to public debt levels and bankruptcies. Obviously this is not perfectly inline with the premise of the article, as bankruptcies can be minimal in provinces in a boom (ie Alberta) in spite of debt levels.
It’s interesting to note that the Atlantic provinces are the most income equal provinces but also have the highest level of bankruptcies. Similarly, although British Columbia has the highest income inequality of all the provinces, it has the third lowest in bankruptcies. Both facts imply the argument the article makes applies to Canada as well.
Have a tax question or an interesting new article or tip? Feel free to contact me at email@example.com – Ken @ Joseph Lea and Associates (Public Accountants).