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Inequality Fragility Hypothesis

Author

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  • Sebastian-Ilie DRAGOE

    (Lucian Blaga University of Sibiu, Romania)

Abstract

The last four decades have been marked by growing inequality. The inequality of income and wealth is one of the most important macroeconomic issues of our time. Inequality contributed to Global Savings Glut and Global Financial Crisis through riskiness channel and a greater propensity to borrow for poor people. This paper presents evidence that besides structural factors, monetary policy, high leverage and the development of new money substitutes are critical in explaining the inequality trend in advanced countries. Increasing economic inequality acts as financial instability enhancer and if left untreated it poses a significant threat to economic sustainability.

Suggested Citation

  • Sebastian-Ilie DRAGOE, 2016. "Inequality Fragility Hypothesis," Expert Journal of Economics, Sprint Investify, vol. 4(2), pages 34-52.
  • Handle: RePEc:exp:econcs:v:4:y:2016:i:2:p:34-52
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    References listed on IDEAS

    as
    1. Thomas Philippon, 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation," American Economic Review, American Economic Association, vol. 105(4), pages 1408-1438, April.
    2. Christoph Lakner & Branko Milanovic, 2016. "Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession," World Bank Economic Review, World Bank Group, vol. 30(2), pages 203-232.
    3. Hyman P. Minsky, 1968. "Effects of Shifts of Aggregate Demand upon Income Distribution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 50(2), pages 328-339.
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    More about this item

    Keywords

    inequality; wage share; wealth distribution; debt; financial instability;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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