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Inequality in the Bubble Economy: Who Gains, Who Loses?

Author

Listed:
  • Xavier Raurich

    (Universitat de Barcelona)

  • Thomas Seegmuller

    (Aix Marseille Univ, CNRS, AMSE, Marseille, France)

Abstract

This study develops a decision-making model for asset portfolios involving heterogeneous individuals, divided into three wealth groups: poor individuals, who own a house and a mortgage; middle-wealth individuals, who own a house and hold deposits; and rich individuals, who own a house and Þnancial assets. The model shows that excessive growth of demand for housing or Þnancial assets generates bubbles on the price of these assets, inßuencing wealth inequality. Housing bubbles beneÞt middle-wealth individuals and may reduce overall inequality, while Þnancial asset bubbles primarily beneÞt the wealthy, exacerbating inequality. The analysis highlights the contrasting effects of housing and Þnancial asset bubbles on wealth distribution across these groups. The model is also calibrated to the US economy over the period 1989-2016. A Þnancial bubble accounts for almost all of the observed changes in the wealth distribution.

Suggested Citation

  • Xavier Raurich & Thomas Seegmuller, 2026. "Inequality in the Bubble Economy: Who Gains, Who Loses?," AMSE Working Papers 2624, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:2624
    Note: Working paper AMSE 2026-24
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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

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