Inequality, Leverage, and Crises
Journal article: 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.
Author(s)
Michael Kumhof, Romain Rancière, Pablo Winant
Journal
- American Economic Review
Date of publication
- 2015
Keywords JEL
Keywords
- Household leverage
- Crises
Pages
- 1217-1245
URL of the HAL notice
Version
- 1
Volume
- 105