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Inequality, the Crisis and After

Author

Listed:
  • Jean-Paul Fitoussi

    () (OFCE, Paris)

  • Francesco Saraceno

    () (OFCE, Paris)

Abstract

Although the crisis emerged in the financial sector, its roots are deeper and lie in a structural change in income distribution that begun in the 1980s. The increase of inequality depressed aggregate demand by the middle-class, while the search for high returns by the wealthiest led to the emergence of bubbles. Net wealth became overvalued, and asset prices gave the false impression that high levels of debt were sustainable. We further argue that the trend of increasing inequality interacted differently with policies and institutions, to yield radically different outcomes in the US and in European countries before the onset of the crisis.

Suggested Citation

  • Jean-Paul Fitoussi & Francesco Saraceno, 2011. "Inequality, the Crisis and After," Rivista di Politica Economica, SIPI Spa, issue 1, pages 9-27, January-M.
  • Handle: RePEc:rpo:ripoec:y:2011:i:1:p:9-27
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Inégalités et déséquilibres globaux : reconsidérer de vieilles idées pour traiter de nouveaux problèmes
      by creel in OFCE le blog on 2013-05-27 14:12:25
    2. Inequality and Global Imbalances: reconsidering old ideas to address new problems
      by creel in OFCE le blog on 2013-05-27 14:50:00

    Citations

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    Cited by:

    1. repec:eee:jeborg:v:149:y:2018:i:c:p:434-458 is not listed on IDEAS
    2. Saraceno, Francesco., 2015. "Challenges for the ECB in times of deflation," ILO Working Papers 994881293402676, International Labour Organization.
    3. Xavier Timbeau, 2014. "From austerity to stagnation how to avoid the deflation trap: The independant annual growth survey 2014," Sciences Po publications info:hdl:2441/c5gs2rgi93a, Sciences Po.
    4. Joseph E. Stiglitz, 2014. "Reconstructing Macroeconomic Theory to Manage Economic Policy," NBER Working Papers 20517, National Bureau of Economic Research, Inc.
    5. Perugini, Cristiano & Hölscher, Jens & Collie, Simon, 2013. "Inequality, credit expansion and financial crises," MPRA Paper 51336, University Library of Munich, Germany.
    6. Gilles Dufrénot & Meryem Rhouzlane, 2018. "Secular Stagnation: New Challenges for the Industrialized Countries in the 21st Century," Working Papers halshs-01821669, HAL.
    7. Xavier Timbeau, 2015. "A diverging Europe on the edge: The independent Annual Growth Survey 2015," Sciences Po publications info:hdl:2441/4s2r6d8kua9, Sciences Po.
    8. repec:ilo:ilowps:488129 is not listed on IDEAS
    9. Francesco Saraceno, 2016. "The ECB: a reluctant leading character of the EMU play," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 129-151, August.

    More about this item

    Keywords

    financial crisis; income inequality; US and EU comparison; debt; aggregate demand;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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