High inequality and its impact on the economy

L'impact économique des fortes inégalités: problèmes et solutions

Francesco Saraceno ()
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Francesco Saraceno: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This brief argues that increasing inequality had deep macroeconomic consequences as it contributed, in combination with credit institutions, to either stagnating aggregate demand or to increasing public and private debt. Inequality may also contribute, along with supply factors, to the drifting towards secular stagnation. Income distribution would then be one of the major determinants of the increasing global imbalances that made the world economy extremely fragile at the outset of the crisis. The crisis in turn exacerbated inequality, especially in peripheral Eurozone countries. The path towards sustainable future growth passes therefore for a reduction of inequality that, in particular in European countries, needs to be coordinated. Finally, if rent-seeking plays an important role in the past increase of inequality, then active fiscal policies and regulation need to be part of the effort to curb inequality.

Date: 2014-05
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01053897v2
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Published in Revue de l'OFCE, 2014, Débats et politiques / Debates and policies, Réformer l'Europe (134), pp.177-187. ⟨10.3917/reof.134.0187⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-01053897

DOI: 10.3917/reof.134.0187

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