Polling data suggest that Americans are concerned about rising economic inequality, yet the same polls reveal popular opposition to redistributive tax policies that would help mitigate inequality. Numerous commentators have drawn attention to this paradox, attempting to explain why voters would...

In this study, we set up a DSGE model with upward looking consumption comparison and show that consumption externalities are an important driver of consumer credit dynamics. Our model economy is populated by two different household types. Investors, who hold the economy's capital stock, own the...