Skip to main content Accessibility help
Hostname: page-component-5959bf8d4d-xqm7d Total loading time: 0.278 Render date: 2022-12-08T04:19:26.318Z Has data issue: true Feature Flags: { "useRatesEcommerce": false } hasContentIssue true

Taking Credit

Redistribution and Borrowing in an Age of Economic Polarization

Published online by Cambridge University Press:  24 August 2017


Several recent studies link rising income inequality in the United States to the global financial crisis, arguing that US politicians did not respond to growing inequality with fiscal redistribution. Instead, Americans saved less and borrowed more to maintain relative consumption in the face of widening economic disparities. This article proposes a theory in which fiscal redistribution dampens the willingness of citizens to borrow to fund current consumption. A key implication is that pretax inequality will be more tightly linked with credit in less redistributive countries. The long-run partisan composition of government is, in turn, a key determinant of redistributive effort. Examining a panel of eighteen OECD democracies, the authors find that countries with limited histories of left-wing participation in government are significantly more likely see credit expansion as prefisc inequality grows compared to those in which the political left has been more influential.

Research Article
Copyright © Trustees of Princeton University 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Adelino, Manuel, Schoar, Antoinette, and Severino, Felipe. 2016. “Loan Originations and Defaults in the Mortgage Crisis: The Role of the Middle Class.” Review of Financial Studies 29, no. 7: 1635–70. doi: 10.1093/rfs/hhw018.CrossRefGoogle Scholar
Adolph, Christopher. 2013. Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality. New York, N.Y.: Cambridge University Press.CrossRefGoogle Scholar
Ahlquist, John S., and Ansell, Ben W.. “Replication Material for ‘Taking Credit: Redistribution and Borrowing in an Age of Economic Polarization.’ ” Harvard Dataverse, V1. doi: 10.7910/DVN/JBYLA S.CrossRefGoogle Scholar
Ahlquist, John S., and Ansell, Ben W.. 2017b. Supplementary material for “Taking Credit: Redistribution and Borrowing in an Age of Economic Polarization.” At https://10.1017/S0043887117000089.Google Scholar
Ahlquist, John S., and Breunig, Christian. 2012. “Model-Based Clustering and Typologies in the Social Sciences.” Political Analysis 20, no. 1: 92112. doi: 10.1093/pan/mpr039.CrossRefGoogle Scholar
Alvaredo, Facundo, Atkinson, Anthony B., Piketty, Thomas, and Saez, Emmanuel. 2014. “The World Top Incomes Database.” At Last accessed January 17, 2014.Google Scholar
Ansell, Ben. 2014. “The Political Economy of Ownership: Housing Markets and the Welfare State.” American Political Science Review 108, no. 2: 383402. doi: 10.1017/S0003055414000045.CrossRefGoogle Scholar
Armingeon, Klaus, Careja, Romana, Weisstanner, David, Engler, Sarah, Potolidis, Panajotis, and Gerber, Marlène. 2012. “Comparative Political Data Set III 1990–2010.” Bern, Switzerland: Institute of Political Science, University of Berne. At, accessed January 19, 2017.Google Scholar
Austen-Smith, David. 2000. “Redistributing Income under Proportional Representation.” Journal of Political Economy 108, no. 6: 1235–69. doi: 10.1086/317680.CrossRefGoogle Scholar
Banerjee, Sudipto, Carlin, Bradley P., and Gelfand, Alan E.. 2003 Hierarchical Modeling and Analysis for Spatial Data. New York, N.Y.: Chapman & Hall/CRC.CrossRefGoogle ScholarPubMed
Beck, Thorsten, Demirgüç-Kunt, Asli, and Levine, Ross. 2000. “A New Database on the Structure and Development of the Financial Sector.” World Bank Economic Review 14, no. 3: 597605. At Scholar
Bertrand, Marianne, and Morse, Adair. 2016. “Trickle-Down Consumption.” Review of Economics and Statistics 98, no. 5: 863–79. doi: 10.1162/REST_a_00613.CrossRefGoogle Scholar
Besag, Julian, and Kooperberg, Charles. 1995. “On Conditional and Intrinsic Autoregressions.” Biometrika 82, no. 4: 733–46. doi: 10.2307/2337341.Google Scholar
Bilancinia, Ennio, and Boncinelli, Leonardo. 2012. “Redistribution and the Notion of Social Status.” Journal of Public Economics 96, no. 9–10: 651–57. doi: 10.1016/j.jpubeco.2012.05.007.CrossRefGoogle Scholar
Bogaerts, Tess, and Pandelaere, Mario. 2013. “Less Is More: Why Some Domains Are More Positional than Others.” Journal of Economic Psychology 39, December: 225–36. doi: 10.1016/j.joep.2013.08.005.CrossRefGoogle Scholar
Boix, Carles. 1998. Political Parties, Growth and Equality: Conservative and Social Democratic Economic Strategies in the World Economy. Cambridge Studies in Comparative Politics. New York, N.Y.: Cambridge University Press.CrossRefGoogle Scholar
Bordo, Michael D., and Meissner, Christopher M.. 2012. “Does Inequality Lead to a Financial Crisis?” NBER Working Paper No. 17896. Cambridge, Mass.: National Bureau of Economic Research. doi: 10.3386/w17896.CrossRefGoogle Scholar
Bracke, Thierry, Bussière, Matthieu, Fidora, Michael, and Straub, Roland. 2010. “A Framework for Assessing Global Imbalances.” World Economy 33, no. 9: 1140–74.CrossRefGoogle Scholar
Bradley, David, Huber, Eveleyn, Moller, Stefanie, Nielsen, François, and Stephens, John D.. 2003. “Distribution and Redistribution in Postindustrial Democracies.” World Politics 55, no. 2 (January): 193228. doi: 10.1353/wp.2003.0009.CrossRefGoogle Scholar
Caballero, Julián A. 2016. “Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?Economic Journal 126, no. 591: 281316. doi: 10.1111/ecoj.12172.CrossRefGoogle Scholar
Chang, Eric C. C., Kayser, Mark Andreas, Linzer, Drew A., and Rogowski, Ronald. 2010. Electoral Systems and the Balance of Consumer-Producer Power. Cambridge Studies in Comparative Politics. New York, N.Y.: Cambridge University Press.CrossRefGoogle Scholar
Chang, Eric C. C., Kayser, Mark Andreas, and Rogowski, Ronald. 2008. “Electoral Systems and Real Prices: Panel Evidence for the OECD Countries, 1970–2000.” British Journal of Political Science 38, no. 4: 739–51. doi: 10.1017 /S0007123408000367.Google Scholar
Chinn, Menzie D., and Frieden, Jeffry A.. 2011. Lost Decades: The Making of America's Debt Crisis and the Long Recovery. New York, N.Y.: W. W. Norton & Company.Google Scholar
De Boef, Suzanna, and Keele, Luke. 2008. “Taking Time Seriously.” American Journal of Political Science 52, no. 1: 184200. doi: 10.1111/j.1540-5907.2007.00307.x.CrossRefGoogle Scholar
Drechsel-Grau, Moritz, and Schmid, Kai D.. 2014. “Consumption–Savings Decisions under Upward-Looking Comparisons.” Journal of Economic Behavior & Organization 106, October: 254–68. doi: 10.1016/j.jebo.2014.07.006.CrossRefGoogle Scholar
European Central Bank. n.d. “Statistical Data Warehouse.” At, accessed November 12, 2013.Google Scholar
Feltovich, Nick, and Ejebu, Ourega-Zoé. 2014. “Do Positional Goods Inhibit Saving? Evidence from a Life–Cycle Experiment.” Journal of Economic Behavior & Organization 107, Part B: 440–54. doi: 10.1016/j.jebo.2014.01.015.CrossRefGoogle Scholar
Frank, Robert H. 1985. Choosing the Right Pond: Human Behavior and the Quest for Status. New York, N.Y.: Oxford University Press.Google Scholar
Frank, Robert H. 2013. Falling Behind: How Rising Inequality Harms the Middle Class. Berkeley, Calif.: University of California Press.Google Scholar
Frank, Robert H., Levine, Adam Seth, and Dijk, Oege. 2005. Expenditure Cascades. Cornell University Mimeograph. Ithaca, N.Y.: Cornell University.Google Scholar
Georgarakos, Dimitris, Haliassos, Michael, and Pasini, Giacomo. 2014. “Household Debt and Social Interactions.” Review of Financial Studies 27, no. 5: 1404–33. doi: 10.1093/rfs/hhu014.CrossRefGoogle Scholar
Gimpelson, Vladimir, and Treisman, Daniel. 2016. “Misperceiving Inequality.” NBER Working Paper No. 21174. Cambridge, Mass: National Bureau of Economic Research. At Scholar
Gingrich, Jane. 2015. “Varying Costs to Change? Institutional Change in the Public Sector.” Governance 28, no. 1: 4160. doi: 10.1111/gove.12076.CrossRefGoogle Scholar
Gingrich, Jane, and Ansell, Ben. 2014. “Sorting for Schools: Housing, Education and Inequality.” Socio-Economic Review 12, no. 2: 329–51. doi: 10.1093/ser/mwu009.CrossRefGoogle Scholar
Gleditsch, Kristian S., and Ward, Michael D.. 2001. “Measuring Space: A Minimum Distance Database and Applications to International Studies.” Journal of Peace Research 38, no. 6: 739–58. doi: 10.1177/0022343301038006006.CrossRefGoogle Scholar
Golder, Matt. 2005. “Democratic Electoral Systems around the World, 1946–2000.” Electoral Studies 24, no. 1: 103–21. doi: 10.1016/j.electstud.2004.02.008.CrossRefGoogle Scholar
Hacker, Jacob S., and Pierson, Paul. 2010. Winner-Take-All Politics: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class. New York, N.Y.: Simon & Schuster.Google Scholar
Hall, Peter A., and Soskice, David. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. New York, N.Y.: Oxford University Press.CrossRefGoogle Scholar
Heston, Alan, Summers, Robert, and Aten, Bettina. 2002. “Penn World Table.” Center for International Comparisons at the University of Pennsylvania. At, accessed January 30, 2014.Google Scholar
Hirsch, Fred. 1978. Social Limits to Growth, 2nd ed. London, UK: Routledge.Google Scholar
International Monetary Fund. n.d.International Finance Statistics.” Washington, D.C.: International Monetary Fund. At, accessed January 31, 2014.Google Scholar
Iversen, Torben, and Soskice, David. 2006. “Electoral Institutions and the Politics of Coalitions: Why Some Democracies Redistribute More than Others.” American Political Science Review 100, no. 2: 165–81. doi: 10.1017/S000305 5406062083.CrossRefGoogle Scholar
Iversen, Torben, and Soskice, David. 2015. “Democratic Limits to Redistribution: Inclusionary versus Exclusionary Coalitions in the Knowledge Economy.” World Politics 67, no. 2 (April): 185225. doi: 10.1017/S0043887115000039.CrossRefGoogle Scholar
Kemeny, Jim. 1981. The Myth of Home-Ownership: Private versus Public Choices in Housing Tenure. London, UK: Routledge Kegan & Paul.Google Scholar
Kenworthy, Lane, and Pontusson, Jonas. 2005. “Rising Inequality and the Politics of Redistribution in Affluent Countries.” Perspectives on Politics 3, no. 3: 449–71. doi: 10.1017/S1537592705050292.CrossRefGoogle Scholar
Krippner, Greta R. 2012. Capitalizing on Crisis: The Political Origins of the Rise of Finance. Cambridge, Mass.: Harvard University Press.Google Scholar
Kumhof, Michael, Rancière, Romain, and Winant, Pablo. 2015. “Inequality, Leverage, and Crises.” American Economic Review 105, no. 3: 1217–45. doi: 10.1257/aer.20110683.CrossRefGoogle Scholar
Lewis, Michael. 2010. The Big Short: Inside the Doomsday Machine. New York: W. W. Norton & Company.Google Scholar
Lijphart, Arend. 2012. Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries, 2nd ed. New Haven, Conn.: Yale University Press.Google Scholar
Lizzeri, Alessandro, and Persico, Nicola. 2001. “The Provision of Public Goods under Alternative Electoral Incentives.” American Economic Review 91, no. 1: 225–39. doi: 10.1257/aer.91.1.225.CrossRefGoogle Scholar
Malinen, Tuomas. 2013. “Is There a Relationship Between Income Inequality and Credit Cycles?” ECINEQ WP 2013–292. Verona, Italy: ECINEQ Society for the Study of Economic Inequality. At Scholar
Matlack, Janna L., and Vigdor, Jacob L.. 2008. “Do Rising Tides Lift All Prices? Income Inequality and Housing Affordability.” Journal of Housing Economics 17, no. 3: 212–24. doi: 10.1016/j.jhe.2008.06.004.CrossRefGoogle Scholar
McCarty, Nolan, Poole, Keith T., and Rosenthal, Howard. 2013. Political Bubbles: Financial Crises and the Failure of American Democracy. Princeton, N.J.: Princeton University Press.CrossRefGoogle Scholar
Meltzer, Allan H., and Richard, Scott F.. 1981. “A Rational Theory of the Size of Government.” Journal of Political Economy 89, no. 5: 941–27. doi: 10.1086/261013.CrossRefGoogle Scholar
Mian, Atif, and Sufi, Amir. 2015. House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again. Chicago, Ill.: University of Chicago Press.Google Scholar
Mian, Atif, Sufi, Amir, and Trebbi, Francesco. 2010. “The Political Economy of the US Mortgage Default Crisis.” American Economic Review 100, no. 5: 1967–98. doi: 10.1257/aer.100.5.1967.CrossRefGoogle Scholar
OECD. 2014. “OECD.stat.” Paris, France: Organization for Economic Cooperation and Development doi: 10.1787/data-00285-en.CrossRefGoogle Scholar
Persson, Torsten, and Tabellini, Guido. 1999. “The Size and Scope of Government: Comparative Politics with Rational Politicians.” European Economic Review 43, no. 4–6: 699735. doi: 10.1016/S0014-2921(98)00131-7.CrossRefGoogle Scholar
Pierson, Paul. 2000. “Increasing Returns, Path Dependence, and the Study of Politics.” American Political Science Review 94, no. 2: 251–67. doi: 10.2307/2586011.CrossRefGoogle Scholar
Piketty, Thomas. 2014. Capital in the 21st Century. Goldhammer, Arthur, trans. Cambridge, Mass.: Harvard University Press.Google Scholar
Piketty, Thomas, and Saez, Emmanuel. 2006. “The Evolution of Top Incomes: A Historical and International Perspective.” American Economic Review 96, no. 2: 200205. doi: 10.1257/000282806777212116.CrossRefGoogle Scholar
Prasad, Monica. 2012. The Land of Too Much: American Abundance and the Paradox of Poverty. Cambridge, Mass.: Harvard University Press.CrossRefGoogle Scholar
Rajan, Raghuram G. 2010. Fault Lines: How Hidden Fractures Still Threaten the World Economy. Princeton, N.J.: Princeton University Press.Google Scholar
Ray, Debraj, and Robson, Arthur. 2012. “Status, Intertemporal Choice, and Risk-Taking.” Econometrica 80, no. 4: 1505–31. doi: 10.3982/ECTA9042.Google Scholar
Rogowski, Ronald, and Kayser, Mark Andreas. 2002. “Majoritarian Systems and Consumer Power: Price-Level Evidence from the OECD Countries.” American Journal of Political Science 46, no. 3: 526–39. doi: 10.2307/3088397.CrossRefGoogle Scholar
Rosenbluth, Frances, and Schaap, Ross. 2003. “The Domestic Politics of Banking Regulation.” International Organization 57, no. 2: 307–36. doi: 10.1017/S0020818303572034.CrossRefGoogle Scholar
Schelkle, Waltraud. 2012. “A Crisis of What? Mortgage Credit Markets and the Social Policy of Promoting Home Ownership in the United States and Europe.” Politics & Society 40, no. 1: 5980. doi: 10.1177/0032329211434690.CrossRefGoogle Scholar
Schwartz, Herman. 2009. Subprime Nation: American Power, Global Capital, and the Housing Bubble. Ithaca, N.Y.: Cornell University Press.Google Scholar
Solnick, Sara J., and Hemenway, David. 2005. “Are Positional Concerns Stronger in Some Domains than in Others?American Economic Review 95, no. 2: 147–51. doi: 10.1257/000282805774669925.CrossRefGoogle Scholar
Sullivan, Theresa A., Warren, Elizabeth, and Westbrook, Jay Lawrence. 2006. “Less Stigma or More Financial Distress: An Empirical Analysis of the Extraordinary Increase in Bankruptcy Filings.” Stanford Law Review 59, no. 2: 213–56.Google Scholar
Ticchi, Davide, and Vindigni, Andrea. 2009. “Endogenous Constitutions.” Economic Journal 120, no. 543: 139. doi: 10.1111/j.1468-0297.2009.02309.x.CrossRefGoogle Scholar
Trumball, Gunnar. 2012. “Credit Access and Social Welfare: The Rise of Consumer Lending in the United States and France.” Politics & Society 40, no. 1: 934. doi: 10.1177/0032329211434688.CrossRefGoogle Scholar
Veblen, Thorstein. 2009. The Theory of the Leisure Class. Oxford, UK: Oxford University Press.Google Scholar
World Bank. n.d. “World Development Indicators.” Washington D.C.: World Bank. At, accessed January 31, 2014.Google Scholar
Supplementary material: PDF

Ahlquist and Ansell supplementary material

Ahlquist and Ansell supplementary material 1

Download Ahlquist and Ansell supplementary material(PDF)
PDF 439 KB
Supplementary material: File

Ahlquist and Ansell supplementary material

Ahlquist and Ansell supplementary material 2

Download Ahlquist and Ansell supplementary material(File)
File 16 KB
Cited by

Save article to Kindle

To save this article to your Kindle, first ensure is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the or variations. ‘’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Taking Credit
Available formats

Save article to Dropbox

To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.

Taking Credit
Available formats

Save article to Google Drive

To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.

Taking Credit
Available formats

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *