Household debt and income inequality: Evidence from Italian survey data

Does regional income inequality affect a household's likelihood of being indebted? This question is addressed by using survey data on Italian households. The analysis shows that inequality in the regional income distribution has a negative effect on the probability of being indebted. However, this effect is asymmetric across income groups: greater inequality increases (decreases) the share of indebted households that are at the top (bottom) of the income ladder. The study suggests that supply factors are more important than demand ones in explaining these results.