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Inequality Fragility Hypothesis

Sebastian-Ilie Dragoe
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Sebastian-Ilie Dragoe: Lucian Blaga University of Sibiu, Romania

Expert Journal of Economics, 2016, vol. 4, issue 2, 34-52

Abstract: The last four decades have been marked by growing inequality. The inequality of income and wealth is one of the most important macroeconomic issues of our time. Inequality contributed to Global Savings Glut and Global Financial Crisis through riskiness channel and a greater propensity to borrow for poor people. This paper presents evidence that besides structural factors, monetary policy, high leverage and the development of new money substitutes are critical in explaining the inequality trend in advanced countries. Increasing economic inequality acts as financial instability enhancer and if left untreated it poses a significant threat to economic sustainability.

Keywords: inequality; wage share; wealth distribution; debt; financial instability (search for similar items in EconPapers)
JEL-codes: B22 D31 E50 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:exp:econcs:v:4:y:2016:i:2:p:34-52