Unpublished Paper
Increasing inequality and financial instability
Economics Department Working Paper Series
(2011)
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/