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Inequality, Leverage, and Crises

The American economic review, 2015-03, Vol.105 (3), p.1217-1245 [Peer Reviewed Journal]

Copyright© 2015 American Economic Association ;Copyright American Economic Association Mar 2015 ;Distributed under a Creative Commons Attribution 4.0 International License ;ISSN: 0002-8282 ;EISSN: 1944-7981 ;DOI: 10.1257/aer.20110683 ;CODEN: AENRAA

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Title:
Inequality, Leverage, and Crises
Author: Kumhof, Michael ; Rancière, Romain ; Winant, Pablo
Subjects: Calibration ; Consumer economics ; Debt ; Debt restructuring ; Debt to income ratios ; Economic analysis ; Economics ; Economics and Finance ; Financial crisis ; Financial leverage ; Great Depression ; Great Recession ; Households ; Humanities and Social Sciences ; Income distribution ; Income inequality ; Income shares ; Loan defaults ; Macroeconomics ; Personal debt ; Personal finance ; Ratios ; Recession ; Recessions ; Risk theory ; Stochastic models ; Studies
Is Part Of: The American economic review, 2015-03, Vol.105 (3), p.1217-1245
Description: The paper studies how high household leverage and crises can be caused by changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of high-income households, a large increase in debt leverage of low-and middle-income households, and an eventual financial and real crisis. The paper presents a theoretical model where higher leverage and crises are the endogenous result of a growing income share of high-income households. The model matches the profiles of the income distribution, the debt-to-income ratio and crisis risk for the three decades preceding the Great Recession.
Publisher: Nashville: American Economic Association
Language: English
Identifier: ISSN: 0002-8282
EISSN: 1944-7981
DOI: 10.1257/aer.20110683
CODEN: AENRAA
Source: ProQuest Central

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Inequality, Leverage, and Crises

Copyright© 2015 American Economic Association ;Copyright American Economic Association Mar 2015 ;Distributed under a Creative Commons Attribution 4.0 International License ;ISSN: 0002-8282 ;EISSN: 1944-7981 ;DOI: 10.1257/aer.20110683 ;CODEN: AENRAA

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