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Unpublished Paper
Increasing inequality and financial instability
Economics Department Working Paper Series (2011)
  • Peter Skott, University of Massachusetts - Amherst
Abstract
Rising inequality affects the composition of asset demands as well as aggregate demand. The poor have few financial assets and their portfolio is skewed towards fixed-income assets. The rich, by contrast, hold a large proportion of their wealth in stocks. Thus, an increase in inequality tends to raise the demand for stocks. This generates capital gains, and these gains can fuel a bubble, as desired portfolios shift further towards stocks. JEL Categories: E11, E21
Disciplines
Publication Date
2011
Citation Information
Peter Skott. "Increasing inequality and financial instability" Economics Department Working Paper Series (2011)
Available at: http://works.bepress.com/peter_skott/20/