Inequality, Leverage and Crises
Author | : Romain Ranciere |
Publisher | : International Monetary Fund |
Total Pages | : 40 |
Release | : 2010-11-01 |
ISBN-10 | : 9781455211517 |
ISBN-13 | : 1455211516 |
Rating | : 4/5 (17 Downloads) |
Download or read book Inequality, Leverage and Crises written by Romain Ranciere and published by International Monetary Fund. This book was released on 2010-11-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group''s bargaining power is more effective.