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 portfolios are 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:	2013
Authors:	Skott, Peter
Published in:	Review of Radical Political Economics. - Union for Radical Political Economics. - Vol. 45.2013, 4, p. 478-488
Publisher:	Union for Radical Political Economics
Subject:	earnings inequality \| portfolio composition \| financial instability

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Extent:	text/html
Type of publication:	Article
Classification:	E11 - Marxian; Sraffian; Institutional; Evolutionary ; E21 - Consumption; Saving
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010796862