Inequality in the Bubble Economy: Who Gains, Who Loses?

Xavier Raurich and Thomas Seegmuller
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Xavier Raurich: Universitat de Barcelona
Thomas Seegmuller: Aix Marseille Univ, CNRS, AMSE, Marseille, France

No 2624, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This study develops a decision-making model for asset portfolios involving heterogeneous individuals, divided into three wealth groups: poor individuals, who own a house and a mortgage; middle-wealth individuals, who own a house and hold deposits; and rich individuals, who own a house and Þnancial assets. The model shows that excessive growth of demand for housing or Þnancial assets generates bubbles on the price of these assets, inßuencing wealth inequality. Housing bubbles beneÞt middle-wealth individuals and may reduce overall inequality, while Þnancial asset bubbles primarily beneÞt the wealthy, exacerbating inequality. The analysis highlights the contrasting effects of housing and Þnancial asset bubbles on wealth distribution across these groups. The model is also calibrated to the US economy over the period 1989-2016. A Þnancial bubble accounts for almost all of the observed changes in the wealth distribution.

Keywords: Housing bubbles; Financial asset bubbles; Wealth inequality (search for similar items in EconPapers)
JEL-codes: D31 E21 E44 (search for similar items in EconPapers)
Date: 2026-08-31
Note: Working paper AMSE 2026-24
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