Abstract

http://ssrn.com/abstract=2205524
 
 

References (41)



 
 

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Inequality, the Great Recession, and Slow Recovery


Barry Z. Cynamon


Federal Reserve Bank of Saint Louis

Steven M. Fazzari


Washington University in St. Louis

October 24, 2014


Abstract:     
Rising inequality reduced income growth for the bottom 95 percent of the US personal income distribution beginning about 1980. To maintain stable debt to income, this group’s consumption-income ratio needed to decline, which did not happen through 2006, and its debt-income ratio rose dramatically, unlike the ratio for the top 5 percent. In the Great Recession, the consumption-income ratio for the bottom 95 percent did finally decline, consistent with tighter borrowing constraints, while the top 5 percent ratio rose, consistent with consumption smoothing. We argue that higher inequality and the associated demand drag helps explain the slow recovery.

Number of Pages in PDF File: 41

Keywords: consumption, saving, inequality, aggregate demand

JEL Classification: D12, D31, E21

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Date posted: January 23, 2013 ; Last revised: October 25, 2014

Suggested Citation

Cynamon, Barry Z. and Fazzari, Steven M., Inequality, the Great Recession, and Slow Recovery (October 24, 2014). Available at SSRN: http://ssrn.com/abstract=2205524 or http://dx.doi.org/10.2139/ssrn.2205524

Contact Information

Barry Z. Cynamon
Federal Reserve Bank of Saint Louis ( email )
411 Locust St
Saint Louis, MO 63011
United States
Steven M Fazzari (Contact Author)
Washington University in St. Louis ( email )
One Brookings Drive
St. Louis, MO 63130
United States
314-935-5693 (Phone)
314-935-4156 (Fax)
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