Increasing inequality and financial instability

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.

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Year of publication:	2011
Authors:	Skott, Peter
Publisher:	Amherst, MA : University of Massachusetts, Department of Economics
Subject:	earnings inequality \| portfolio composition \| financial instability

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Series:	Working Paper ; 2011-20
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	671999680 [GVK] hdl:10419/64181 [Handle] RePEc:ums:papers:2011-20 [RePEc]
Classification:	E11 - Marxian; Sraffian; Institutional; Evolutionary ; E21 - Consumption; Saving
Source:	EconStor

Persistent link: https://www.econbiz.de/10010287826