Does inequality lead to a financial crisis?

Bordo, Michael D.; Meissner, Christopher M.

doi:10.1016/j.jimonfin.2012.05.006

Cited by 179 publications

(78 citation statements)

References 20 publications

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“…Cross-country data indicate that banking crises have not systematically been preceded by rising inequality (Atkinson and Morelli, 2011;Bordo and Meissner, 2012), although Gu and Huang (2014) report some supporting evidence. 11…”

Section: Literature Reviewmentioning

confidence: 99%

“…They also report that there "is more evidence that financial crises are followed by rising inequality" (p. 49). Using data from 14 advanced countries between 1920 and 2000, Bordo and Meissner (2012) report that credit booms heighten the probability of a banking crisis, but there is no evidence that a rise in top income shares leads to credit booms. Gu and Huang (2014) challenge these results on econometric grounds.…”

Section: Income Inequalitymentioning

confidence: 99%

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Finance and Income Inequality: A Review and New Evidence

Haan

Sturm

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In contrast with most previous work, our results suggest that all finance variables increase income inequality. The level of financial development conditions the impact of financial liberalization on inequality. Also the quality of political institutions conditions the impact of financial liberalization on income inequality, in contrast to the quality of economic institutions. Our main findings are robust for using random effects, cross-country regressions and legal origin as instrument for financial development. Terms of use: Documents in EconStor mayJEL-Codes: D310, D630, F020, O110, O150.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Income Inequalitymentioning

confidence: 99%

Finance and Income Inequality: A Review and New Evidence

Haan

Sturm

2016

SSRN Journal

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“…Acemoglu (2011), for example, argues that it is more plausible that the …nancial crisis and high levels of inequality, especially at the top-end of the income distribution, were common outcomes arising from lack of regulation of …nancial practices. Bordo and Meissner (2012) provide another dissenting view, arguing that credit booms heighten the probability of a banking crisis but …nding no evidence that increased inequality leads to credit booms. Atkinson and Morelli (2011), in a long-run empirical investigation on both the impact of economic crises on inequality and of the impact of inequality on the probability of crises, obtain inconclusive results.…”

Section: Introductionmentioning

confidence: 99%

Global Interpersonal Inequality: Trends and Measurement

2014

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This paper discusses different approaches to the measurement of global interpersonal in equality. Trends in global interpersonal inequality during are measured using data from UNU-WIDER's World Income Inequality Database. In order to better understand the trends, global interpersonal inequality is decomposed into within-country and between-country inequality. The paper illustrates that the relationship between global interpersonal inequality and these constituent components is a complex one. In particular, we demonstrate that the changes in China s and India s income distributions over the past 30 years have simultaneously caused inequality to rise domestically in those countries, while tending to reduce global inter-personal inequality. In light of these findings, we reflect on the meaning and policy relevance of global vis-à-vis domestic inequality measures.Keywords: global interpersonal inequality, inequality, inequality measurement JEL classification: D31, D63, E01, O15 Acknowledgements: We are grateful to seminar participants at the universities of Helsinki, Oxford, Bielefeld, and Beijing Normal University, for their helpful comments on earlier versions of this paper. All the errors are ours. Global interpersonal inequality Trends and measurementMiguel Niño-Zarazúa y , Laurence Roope z and Finn Tarp x ABSTRACT This paper discusses di¤erent approaches to the measurement of global interpersonal inequality. Trends in global interpersonal inequality during 1975-2005 are measured using data from UNU-WIDER's World Income Inequality Database. In order to better understand the trends, global interpersonal inequality is decomposed into within-country and between-country inequality. The paper illustrates that the relationship between global interpersonal inequality and these constituent components is a complex one. In particular, we demonstrate that the changes in China's and India's income distributions over the past 30 years have simultaneously caused inequality to rise domestically in those countries, while tending to reduce global interpersonal inequality. In light of these …ndings, we re ‡ect on the meaning and policy relevance of global vis-à-vis domestic inequality measures.

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“…Rajan (2012), notably, emphasizes that rising inequality in the USA was linked to the credit boom that eventually ended in the financial crises. Recently, the results in Bordo and Meissner (2012) challenge the conclusions in Rajan (2012) using empirical evidence for 14 countries. Similarly, Stockhammer and Wildauer (2016) find no significant effect of changes in the personal distribution of income on aggregate demand using a sample of OECD economies.…”

Section: Introductionmentioning

confidence: 83%

Does income inequality affect aggregate consumption? Revisiting the evidence

2017

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The standard Keynesian view predicts that equalization of the income distribution leads to an increase in aggregate consumption. We revisit the analysis carried out by the seminal empirical contributions which test such a hypothesis using modern econometric methods and the most comprehensive dataset existing on income distribution measures. Our results indicate that there is no empirical evidence of a negative effect of income inequality on aggregate consumption.

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Does inequality lead to a financial crisis?

Cited by 179 publications

References 20 publications

Finance and Income Inequality: A Review and New Evidence

Finance and Income Inequality: A Review and New Evidence

Global Interpersonal Inequality: Trends and Measurement

Does income inequality affect aggregate consumption? Revisiting the evidence

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