The Joneses' income and debt market participation: Empirical evidence from bank account data

- We study the influence of comparison income on the likelihood to hold debt.
- Different from other studies we use account data instead of surveys.
- Decision to raise debt is related to average income in own residential area.
- Effect exists for different sorts of debt: collateralized, uncollateralized loans and overdraft facilities.
- Conspicuous consumption seems to be partly financed by debt.

In this paper we study whether the decision to raise debt is related to average income in the own residential area. Based on a unique dataset of bank account data we find that bank customers are more likely to hold collateralized and uncollateralized loans and to make use of the overdraft facility when the comparison income is higher, even after controlling for socio-demographic and financial characteristics. This indicates that conspicuous consumption is partly financed by debt.