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Title:Increasing inequality and financial instability PDF Logo
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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