On the dynamic relationship between household debt and income inequality in South Africa

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dc.contributor.authorZhou, Sheunesu
dc.contributor.authorNiyitegeka, Olivier
dc.coverageBasel, Switzerland
dc.coverage.conferenceissn
dc.date.accessioned2026-03-24T06:31:44Z
dc.date.available2026-03-24T06:31:44Z
dc.date.issued2023
dc.departmentNameBusiness Management
dc.description.abstractThis paper analyses the relationship between household debt and income inequality in South Africa for the period 1980–2021. We use two measures of inequality and estimate a vector error correction model (VECM) which includes household debt, inequality, and other macroeconomic variables. To test the robustness of our results, single equation models are used, which estimate household debt as a function of inequality and macroeconomic factors. We employ two measures of inequality, namely Gini coefficient and ratio of top and bottom income earners’ proportion of income. Furthermore, we use both household debt as a percentage of disposable income and household debt service costs as dependent variables in single equation regressions. The study finds a negative and significant relationship between household debt and income inequality in the long run, which contradicts the Rajan hypothesis in the South African case. Rather, we find that inequality in South Africa creates a bias in debt allocation towards high-income earners, whose incomes can easily absorb the extra debt (reduced ratio of debt to disposable income). There are therefore no socio-equity considerations in South African credit markets. We find growth in gross domestic product (GDP) per capita also has a moderating effect on the relationship between household debt and income inequality. High GDP per capita growth in the presence of high inequality reduces the impact of inequality on household debt and vice-versa. All other control variables take expected signs. These results are robust to changes in the inequality or household debt measures.
dc.facultyFaculty of Commerce, Administration and Law
dc.identifier.citationZhou, S. and Niyitegeka, O. 2023. On the dynamic relationship between household debt and income inequality in South Africa. Journal of Risk and Financial Management, 16(10), pp.1-17.
dc.identifier.issn1911-8074 (online)
dc.identifier.issn1911-8066 (print)
dc.identifier.otherhttps://doi.org/10.3390/jrfm16100427
dc.identifier.urihttp://hdl.handle.net/10530/58996
dc.inproceedingsissn
dc.issuenumber16 / 10
dc.keynoteissn
dc.language.isoEnglish
dc.pages1 - 17
dc.peerreviewedYes
dc.publisherMDPI
dc.subjectHousehold debt
dc.subjectInequality
dc.subjectEconomic growth
dc.subjectSouth Africa
dc.subjectRajan hypothesis
dc.subjectTime series
dc.titleOn the dynamic relationship between household debt and income inequality in South Africa
dc.title.journalJournal of Risk and Financial Management
dc.typeJournal Article
dspace.entity.typePublication
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