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Inequality and finance in a rent economy

Inequality and finance in a rent economy

Botta, Alberto, Caverzasi, Eugenio, Russo, Alberto, Gallegati, Mauro and Stiglitz, Joseph E. (2019) Inequality and finance in a rent economy. Journal of Economic Behavior and Organization. ISSN 0167-2681 (doi:https://doi.org/10.1016/j.jebo.2019.02.013)

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Abstract

The present paper aims at offering a contribution to the understanding of the interactions between finance and inequality. We investigate the ways through which income and wealth inequality may have influenced the development of modern financial systems in advanced economies, the US economy first and foremost, and how modern financial systems have then fed back on income and wealth distribution. We focus in particular on securitization and on the production of complex structured financial products. We analyse this topic by elaborating a hybrid Agent-Based Stock-Flow-Consistent (AB-SFC) macroeconomic model, encompassing heterogenous (i.e. households) and aggregate sectors. Our findings suggest that the increase in economic growth, favoured by the higher levels of credit supply coming with securitization, may determine a more unequal and financially unstable economic system. We also find that a lower degree of tax progressiveness and wider wage inequality further polarize income and wage distribution, and reduce economic growth.

Item Type: Article
Uncontrolled Keywords: Inequality, Finanzialization, Shadow banking
Subjects: H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 01 Oct 2019 11:05
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: GREAT 1
URI: http://gala.gre.ac.uk/id/eprint/23101

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