Inequality, Technical Change or Leverage?

Amir Goren

MPRA Paper from University Library of Munich, Germany

Abstract: Exploring the determinants of growing income inequality, I show how constant capital income shares and inequality can be explained without technical change. I show why despite the fact that technical change is capital augmenting, rather than labor augmenting, it may not be sufficient to explain the last few decades of growing capital share of income and inequality due to the balancing mechanism of depreciation. Finally, I show how the growth of leverage, which coincided with the growth of inequality, can explain the growth of capital share of income and inequality. I introduce a simple model of leverage and business cycle and show how leverage is justified by more leverage and how depressed interest rate allows leveraging and inequality growth to persist.

Keywords: Inequality; Technical Change; Leverage; Credit; Business Cycle (search for similar items in EconPapers)
JEL-codes: E00 E10 E13 E32 (search for similar items in EconPapers)
Date: 2016-08-10
New Economics Papers: this item is included in nep-gro and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72983

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