Inequality, Leverage, and Crises
2015 ◽
Vol 105
(3)
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pp. 1217-1245
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Keyword(s):
The paper studies how high household leverage and crises can be caused by changes in the income distribution. Empirically, the periods 1920–1929 and 1983–2008 both exhibited a large increase in the income share of high-income households, a large increase in debt leverage of low- and middle-income households, and an eventual financial and real crisis. The paper presents a theoretical model where higher leverage and crises are the endogenous result of a growing income share of high-income households. The model matches the profiles of the income distribution, the debt-to-income ratio and crisis risk for the three decades preceding the Great Recession. (JEL D14, D31, D33, E32, E44, G01, N22)
2017 ◽
Vol 4
(2)
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pp. 166-173
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Keyword(s):
2016 ◽
Vol 8
(11)
◽
pp. 278
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2018 ◽
Vol 66
(3)
◽
pp. 255-262
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Keyword(s):
2021 ◽