Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64181
Authors: 
Skott, Peter
Year of Publication: 
2011
Series/Report no.: 
Working Paper, University of Massachusetts, Department of Economics 2011-20
Abstract: 
Rising inequality affects the composition of asset demands as well as aggregate demand. The poor have few financial assets and their portfolio is skewed towards fixed-income assets. The rich, by contrast, hold a large proportion of their wealth in stocks. Thus, an increase in inequality tends to raise the demand for stocks. This generates capital gains, and these gains can fuel a bubble, as desired portfolios shift further towards stocks.
Subjects: 
earnings inequality
portfolio composition
financial instability
JEL: 
E11
E21
Document Type: 
Working Paper

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