The debt to GDP ratio has been used as a key indicator for economists, governments and investors as a general measure of a country's ability to repay debt. The primary focus of our analysis was to see if there was correlation between the United States debt to GDP ratio and the wealth gap. We found this topic to be highly interesting and theoretical about the current social and political structure of the world today. According to Ray Dalio the founder of Bridgewater Associates the wealth gap today is at levels that have not been seen since 1935. He also states that along with the increasing wealth gap there is an increase in populist movements amongst the country, which was also the case in times before World War 2. We were highly interested in these claims and decided to investigate further. Although we will not be able to conduct any regressions on the claims of increased populism, we are able to analyze the current situation of the American wealth gap. To conduct our study we decided that to obtain an accurate measure of the wealth gap, we would need independent variables for the share of wealth obtained by the top 1% of all Americans, and the share of wealth owned by the bottom 50% of all Americans. Our initial prediction was that a larger debt to GDP ratio would increase the wealth gap. We ran a series of regressions to test this hypothesis. We then found statistically significant information to back up our hypothesis. Multicollinearity was present in our regression analysis but limited to a minimal amount.
Economics, Finance, & Accounting
Copyright the Author(s)
Eilert, Braxten and Parde, Zachary
"The Relationship Between Debt to GDP and the Wealth Gap,"
SACAD: John Heinrichs Scholarly and Creative Activity Days: Vol. 2023, Article 34.
Available at: https://scholars.fhsu.edu/sacad/vol2023/iss2023/34