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Inequality and finance in a rent economy

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  • Botta, Alberto
  • Caverzasi, Eugenio
  • Russo, Alberto
  • Gallegati, Mauro
  • Stiglitz, Joseph E.

Abstract

The present paper aims at offering a contribution to the understanding of the interactions between finance and inequality. We investigate the ways through which income and wealth inequality may have influenced the development of modern financial systems in advanced economies, the US economy first and foremost, and how modern financial systems have then fed back on income and wealth distribution. We focus in particular on securitization and on the production of complex structured financial products. We analyse this topic by elaborating a simulated hybrid Agent-Based Stock-Flow-Consistent (AB-SFC) macroeconomic model, encompassing heterogeneous (i.e. households) and aggregate sectors. Our findings suggest that the increase in economic growth, favoured by the higher level of credit supply coming with securitization, may determine a more unequal and financially unstable economic system.

Suggested Citation

  • Botta, Alberto & Caverzasi, Eugenio & Russo, Alberto & Gallegati, Mauro & Stiglitz, Joseph E., 2018. "Inequality and finance in a rent economy," Greenwich Papers in Political Economy 20377, University of Greenwich, Greenwich Political Economy Research Centre.
    • Handle: RePEc:gpe:wpaper:20377
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    File URL: http://gala.gre.ac.uk/id/eprint/20377/13/20377%20BOTTA_Inequality_and_Finance_in_a%20Rent_Economy_%28GPERC66%29_2018.pdf
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    Keywords

    Inequality; securitization; rent economy; financial crisis; AB model; SFC approach;
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