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Working Papers, Department of Economics, University of Massachusetts >
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http://hdl.handle.net/10419/64181
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| Title: | | Increasing inequality and financial instability  |
| Authors: | | Skott, Peter |
| Issue Date: | | 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 |
| Appears in Collections: | | Working Papers, Department of Economics, University of Massachusetts
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