This project examines the role of inequality for personal debt uptake in Europe. Up until the global economic crisis personal debt levels have soared in most Western countries. Similarly, these countries have experienced increases in income inequality (Giesecke & Verwiebe, 2009; Machin, 2003; OECD, 2008; Smeeding, 2005). It is now well documented that income inequality hinders economic growth (OECD, 2014), negatively affects health and accentuates social disadvantage (Wilkinson and Pickett, 2009). We argue that income inequality is also a driver of debt accumulation.

Some US studies have shown that income inequality and debt are related (Iacoviello, 2007; Christen and Morgan, 2005). It is found by these studies that income inequality promotes debt accumulation as individuals may want to keep up with the consumption patterns of higher income groups. There is yet little understanding on the mechanisms behind this relationship. Do individuals accumulate debt because they compare themselves economically to higher income groups or do individuals accumulate debt because they are economically lagging behind? 

This project is innovative because we:

1. employ micro-level sociological and social psychology theories of social comparison and relative deprivation to examine the mechanisms behind debt uptake

2. we consequently add the role of the macro-level by examining these mechanisms across societies with different levels of inequality and social protection

The interdisciplinary and international nature of the study contributes to add a new perspective to a topic that has traditionally pertained to the economics domain, and so it also complements existing theories on indebtedness.