Inequality, Leverage and Crises
AbstractThe paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2007 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group’s bargaining power is more effective.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8179.
Date of creation: Jan 2011
Date of revision:
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Other versions of this item:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G01 - Financial Economics - - General - - - Financial Crises
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Inequality & the crisis
by chris dillow in Stumbling and Mumbling on 2012-03-08 12:52:12
- Quels liens entre inÃ©galitÃ©s, redistribution et croissance ?
by ? in D'un champ l'autre on 2014-02-28 15:05:00
- Doit-on craindre la hausse des inÃ©galitÃ©s ?
by firstname.lastname@example.org (David Marguerit) in BS Initiative on 2013-12-03 13:44:04
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