Death by a Thousand Cuts: Financial Innovation and Income Inequality

William Redmond

Journal of Economic Issues, 2014, vol. 48, issue 2, 413-420

Abstract: Financial innovations come in a spectrum of sizes and complexities. This paper deals with the sorts of small-scale, noncomplex innovations that are frequently used by low and lower middle class individuals. These come in many versions, and a given individual may use five or ten. While no single one of these innovation likely makes a significant difference in income inequality, cumulatively they may cost a household thousands of dollars a year. When taken across millions of households, the effect is to materially increase inequality. Small-scale financial innovations are not just a case of making the less well-off even worse off. Money moves up the ladder.

Date: 2014
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DOI: 10.2753/JEI0021-3624480215

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