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Banking crises in the US: the response of top income shares in a historical perspective

Salvatore Morelli ()
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Salvatore Morelli: Stone Center on Socio-Economic Inequality CUNY - The Graduate Center

The Journal of Economic Inequality, 2018, vol. 16, issue 2, No 6, 257-294

Abstract: Abstract This paper examines the response of income concentration in the US to the occurrence of major systemic banking crises since the beginning of the twentieth century. In doing so, the paper analyzes the shape of the upper income tail as well as the national income shares accruing to different groups within the richest decile. The findings suggest that systemic banking crises reduce income concentration within the top decile of the US pre–tax and transfers income distribution, and more generally, that the effect is highly heterogeneous across different top income groups. While the richest income group loses ground, the lower half of the top decile appears to gain in relative terms. However, evidence suggests that the estimated short-term effect of market forces stemming from banking crises can be relatively small in magnitude and even temporary in nature, as it may be quickly reabsorbed. These findings lend indirect support to the idea that only substantial changes in government policies and institutional frameworks can bring about radical changes in income distribution.

Keywords: Systemic banking crises; Top income shares; US; ADL; Time series; Impulse responses; Pareto coefficient (search for similar items in EconPapers)
Date: 2018
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