Inequality, the Crisis and after

Jean-Paul Fitoussi and Francesco Saraceno ()
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Francesco Saraceno: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: Although the crisis emerged in the financial sector, its roots are deeper and lie in a structural change in income distribution that begun in the 1980s. The increase of inequality depressed aggregate demand by the middle-class, while the search for high returns by the wealthiest led to the emergence of bubbles. Net wealth became overvalued, and asset prices gave the false impression that high levels of debt were sustainable. We further argue that the trend of increasing inequality interacted differently with policies and institutions, to yield radically different outcomes in the US and in European countries before the onset of the crisis.

Date: 2011-03
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Published in Rivista di politica economica, 2011, III (I-III), pp.9 - 27

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Journal Article: Inequality, the Crisis and After (2011)
Working Paper: Inequality, the Crisis and after (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03415498

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