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Inequality and Crises Revisited

Abstract

Recent debate has suggested that growing levels or high levels of inequality may be systematically associated with the occurrence of banking crises. Using the updated version of the Chartbook of Economic Inequality, this paper provides new empirical evidence on the `level' hypothesis and reassesses the empirical validity of the `growth' hypothesis. In line with previous work, the empirical analysis on the entire set of countries and years under investigation does not provide any conclusive and compelling statistical support to either of the hypotheses. However, the apparent statistical insignificance of the findings does not rule out the economic relevance of the question at hand, given that the hypotheses cannot be rejected for important crises and countries such as the US and the UK. Hence, the overall evidence is far from being conclusive and there are several reasons to shed further light on this important research topic.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 387.

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Date of creation: 22 Jan 2015
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Publication status: Published in Economia Politica - Journal of Analytical and Institutional Economics, 2015, 32(1), pp 31-51.
Handle: RePEc:sef:csefwp:387
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Find related papers by JEL classification:
  • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
  • D39 - Microeconomics - - Distribution - - - Other

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  1. A. B. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Economic Studies, CESifo, vol. 49(4), pages 479-513.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, number 8973, 06-2016.
  4. Perugini, Cristiano & Hölscher, Jens & Collie, Simon, 2013. "Inequality, credit expansion and financial crises," MPRA Paper 51336, University Library of Munich, Germany.
  5. Olivier Coibion & Yuriy Gorodnichenko & Lorenz Kueng & John Silvia, 2012. "Innocent Bystanders? Monetary Policy and Inequality in the U.S," NBER Working Papers 18170, National Bureau of Economic Research, Inc.
  6. Moritz Schularick & Alan M. Taylor, 2012. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008," American Economic Review, American Economic Association, vol. 102(2), pages 1029-61, April.
  7. Georgarakos, Dimitris & Haliassos, Michael & Pasini, Giacomo, 2012. "Household debt and social interactions," CFS Working Paper Series 2012/05, Center for Financial Studies (CFS).
  8. Jonathan Zinman, 2014. "Household Debt: Facts, Puzzles, Theories, and Policies," NBER Working Papers 20496, National Bureau of Economic Research, Inc.
  9. Giorgio Bellettini & Flavio Delbono, 2013. "Persistence of High Income Inequality and Banking Crises: 1980-2010," CESifo Working Paper Series 4293, CESifo Group Munich.
  10. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
  11. Federico Ravenna & Nicolas Vincent, 2014. "Inequality and Debt in a Model with Heterogeneous Agents," Cahiers de recherche 1408, CIRPEE.
  12. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
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  14. Giacomo De Giorgi & Anders Frederiksen & Luigi Pistaferri, 2016. "Consumption Network Effects," NBER Working Papers 22357, National Bureau of Economic Research, Inc.
  15. Anthony B. Atkinson & Salvatore Morelli, 2014. "Chartbook of economic inequality," Working Papers 324, ECINEQ, Society for the Study of Economic Inequality.
  16. Christopher Brown, 2004. "Does income distribution matter for effective demand? Evidence from the United States," Review of Political Economy, Taylor & Francis Journals, vol. 16(3), pages 291-307.
  17. Carmen M. Reinhart, 2010. "This Time is Different Chartbook: Country Histories on Debt, Default, and Financial Crises," NBER Working Papers 15815, National Bureau of Economic Research, Inc.
  18. Matteo Iacoviello, 2005. "Household Debt and Income Inequality, 1963-2003," Boston College Working Papers in Economics 629, Boston College Department of Economics, revised 18 Oct 2007.
  19. Anthony B. Atkinson & Salvatore Morelli, 2011. "Economic crises and Inequality," Human Development Research Papers (2009 to present) HDRP-2011-06, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
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Cited by:

  1. Ben Etheridge, 2016. "Sell, Friedrich L.: The new economics of income distribution: introducing equilibrium concepts into a contested field," Journal of Economics, Springer, vol. 119(2), pages 171-173, October.
  2. Peña, Guillermo, 2016. "The determinants of banking crises: Further evidence," MPRA Paper 70093, University Library of Munich, Germany.
  3. Björn Bartling & Manuel Grieder & Christian Zehnder, 2015. "Does Competition Justify Inequality?," CESifo Working Paper Series 5651, CESifo Group Munich.

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