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Systemic Financial Crises and Income Inequality in OECD Countries

Author

Listed:
  • Puneet Arora

    (Charles University)

  • Alberto Chong

    (Department of Economics, Georgia State University and Department of Economics, Universidad del Pacifico)

  • Carla Srebot

    (University of British Columbia)

Abstract

We offer a theory and evidence that support the view that systemic financial crises impact income inequality negatively in richer countries, where institutions such as social safety nets work better than in developing countries. More generally, to our knowledge, our work is the first to provide empirical evidence that supports the view that systemic financial crises may have a causal impact on income inequality and that a driving mechanism may be vulnerable employment. In order to do this, we apply a difference-in-difference approach and provide evidence that the parallel trends assumption is complied with.

Suggested Citation

  • Puneet Arora & Alberto Chong & Carla Srebot, 2023. "Systemic Financial Crises and Income Inequality in OECD Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper2316, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper2316
    as

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    File URL: https://icepp.gsu.edu/files/2023/08/paper2316.pdf
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    References listed on IDEAS

    as
    1. Alberto Chong & Mark Gradstein, 2007. "Inequality and Institutions," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 454-465, August.
    2. Bordo, Michael D. & Meissner, Christopher M., 2012. "Does inequality lead to a financial crisis?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2147-2161.
    3. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    4. Martin Cihak & Ratna Sahay, 2020. "Finance and Inequality," IMF Staff Discussion Notes 20/01, International Monetary Fund.
    5. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111.
    6. repec:idb:brikps:39798 is not listed on IDEAS
    7. Kevin J. Fox & Nicholas Oulton & María Sebastiá-Barriel, 2017. "Effects of Financial Crises on Productivity, Capital and Employment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 90-112, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • G0 - Financial Economics - - General
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General

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