Degree Name

Master of Arts (MA)

Semester of Degree Completion

1977

Thesis Director

Lawrence W. Bates

Abstract

In the late forties and early fifties concern emerged in some economic circles because installment debt was growing more rapidly than income. Overextensions of debt in the long run were believed to jeopardize future prosperity of the economy. To demonstrate that the rate of growth of debt would not threaten future prosperity, A. Enthoven designed a debt-income growth model. Michael K. Evans reaffirmed Enthoven's conclusions in a later study. However, in 1964 and 1967, the model and its assumptions were attacked by Oliver and Chiu and Brosky, respectively.

This study tests again Enthoven's model and its assumptions using up-to-date data. It was found that the model, its assumptions and its implications, are still applicable to the present economy. Thus, with the model, it is shown that the actual (current) debt to income ratio is still below its equilibrium level. It is also shown that asymptotic convergence of growth rates of debt and of income support the hypothesis that continued growth of installment debt is not inconsistent with the future prosperity of the economy.

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