The inequality debate: Do financial markets matter?

Saad Azmat, Ahmad Ayub, Kym Brown and Michael Skully

Journal of Behavioral and Experimental Finance, 2020, vol. 27, issue C

Abstract: This paper investigates whether economic divergence and wealth inequality could be an outcome of asset price bubbles in financial markets. When returns from financial markets outweigh real returns, shareholders could earn significantly more than workers, causing income inequality. Simulations show that economies with a return on capital higher than the marginal productivity of capital will have a higher steady state and experience greater growth. Using the S&P500 stock market returns data from 1880 to 2010, we show that with high growth and rising financial returns, the wealth inequality between shareholders and workers increases but may decrease during a financial crisis.

Keywords: Income inequality; Asset price bubble; Financial crisis; Economic growth (search for similar items in EconPapers)
JEL-codes: D63 G10 O16 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:27:y:2020:i:c:s2214635019302667

DOI: 10.1016/j.jbef.2020.100384

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