Skip to main content

Taking Credit: Redistribution and Borrowing in an Age of Economic Polarization

  • John S. Ahlquist and Ben W. Ansell

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.

Hide All
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.
Adolph Christopher. 2013. Bankers, Bureaucrats, and Central Bank Politics: The Myth of Neutrality. New York, N.Y.: Cambridge University Press.
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.
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.
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.
Alvaredo Facundo, Atkinson Anthony B., Piketty Thomas, and Saez Emmanuel. 2014. “The World Top Incomes Database.” At Last accessed January 17, 2014.
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.
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.
Austen-Smith David. 2000. “Redistributing Income under Proportional Representation.” Journal of Political Economy 108, no. 6: 1235–69. doi: 10.1086/317680.
Banerjee Sudipto, Carlin Bradley P., and Gelfand Alan E.. 2003 Hierarchical Modeling and Analysis for Spatial Data. New York, N.Y.: Chapman & Hall/CRC.
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
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.
Besag Julian, and Kooperberg Charles. 1995. “On Conditional and Intrinsic Autoregressions.” Biometrika 82, no. 4: 733–46. doi: 10.2307/2337341.
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.
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.
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.
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.
Bracke Thierry, Bussière Matthieu, Fidora Michael, and Straub Roland. 2010. “A Framework for Assessing Global Imbalances.” World Economy 33, no. 9: 1140–74.
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.
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.
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.
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.
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.
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.
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.
European Central Bank. n.d. “Statistical Data Warehouse.” At, accessed November 12, 2013.
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.
Frank Robert H. 1985. Choosing the Right Pond: Human Behavior and the Quest for Status. New York, N.Y.: Oxford University Press.
Frank Robert H. 2013. Falling Behind: How Rising Inequality Harms the Middle Class. Berkeley, Calif.: University of California Press.
Frank Robert H., Levine Adam Seth, and Dijk Oege. 2005. Expenditure Cascades. Cornell University Mimeograph. Ithaca, N.Y.: Cornell University.
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.
Gimpelson Vladimir, and Treisman Daniel. 2016. “Misperceiving Inequality.” NBER Working Paper No. 21174. Cambridge, Mass: National Bureau of Economic Research. At
Gingrich Jane. 2015. “Varying Costs to Change? Institutional Change in the Public Sector.” Governance 28, no. 1: 4160. doi: 10.1111/gove.12076.
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.
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.
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.
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.
Hall Peter A., and Soskice David. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. New York, N.Y.: Oxford University Press.
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.
Hirsch Fred. 1978. Social Limits to Growth, 2nd ed. London, UK: Routledge.
International Monetary Fund. n.d.International Finance Statistics.” Washington, D.C.: International Monetary Fund. At, accessed January 31, 2014.
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.
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.
Kemeny Jim. 1981. The Myth of Home-Ownership: Private versus Public Choices in Housing Tenure. London, UK: Routledge Kegan & Paul.
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.
Krippner Greta R. 2012. Capitalizing on Crisis: The Political Origins of the Rise of Finance. Cambridge, Mass.: Harvard University Press.
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.
Lewis Michael. 2010. The Big Short: Inside the Doomsday Machine. New York: W. W. Norton & Company.
Lijphart Arend. 2012. Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries, 2nd ed. New Haven, Conn.: Yale University Press.
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.
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
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.
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.
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.
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.
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.
OECD. 2014. “OECD.stat.” Paris, France: Organization for Economic Cooperation and Development doi: 10.1787/data-00285-en.
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.
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.
Piketty Thomas. 2014. Capital in the 21st Century. Goldhammer Arthur, trans. Cambridge, Mass.: Harvard University Press.
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.
Prasad Monica. 2012. The Land of Too Much: American Abundance and the Paradox of Poverty. Cambridge, Mass.: Harvard University Press.
Rajan Raghuram G. 2010. Fault Lines: How Hidden Fractures Still Threaten the World Economy. Princeton, N.J.: Princeton University Press.
Ray Debraj, and Robson Arthur. 2012. “Status, Intertemporal Choice, and Risk-Taking.” Econometrica 80, no. 4: 1505–31. doi: 10.3982/ECTA9042.
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.
Rosenbluth Frances, and Schaap Ross. 2003. “The Domestic Politics of Banking Regulation.” International Organization 57, no. 2: 307–36. doi: 10.1017/S0020818303572034.
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.
Schwartz Herman. 2009. Subprime Nation: American Power, Global Capital, and the Housing Bubble. Ithaca, N.Y.: Cornell University Press.
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.
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.
Ticchi Davide, and Vindigni Andrea. 2009. “Endogenous Constitutions.” Economic Journal 120, no. 543: 139. doi: 10.1111/j.1468-0297.2009.02309.x.
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.
Veblen Thorstein. 2009. The Theory of the Leisure Class. Oxford, UK: Oxford University Press.
World Bank. n.d. “World Development Indicators.” Washington D.C.: World Bank. At, accessed January 31, 2014.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

World Politics
  • ISSN: 0043-8871
  • EISSN: 1086-3338
  • URL: /core/journals/world-politics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
Type Description Title
Supplementary materials

Ahlquist and Ansell supplementary material
Ahlquist and Ansell supplementary material 2

 Word (16 KB)
16 KB
Supplementary materials

Ahlquist and Ansell supplementary material
Ahlquist and Ansell supplementary material 1

 PDF (439 KB)
439 KB


Altmetric attention score

Full text views

Total number of HTML views: 13
Total number of PDF views: 312 *
Loading metrics...

Abstract views

Total abstract views: 781 *
Loading metrics...

* Views captured on Cambridge Core between 24th August 2017 - 19th February 2018. This data will be updated every 24 hours.