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

March 19, 2014


Abstract:     
Rising inequality reduced income growth for the bottom 95 percent of the income distribution beginning about 1980, but that group’s consumption growth did not fall proportionally. Instead, lower saving led to increasing balance sheet fragility for the bottom 95 percent, eventually triggering the Great Recession. We decompose consumption and saving across income groups. The consumption-income ratio of the bottom 95 percent fell sharply in the recession, consistent with tighter borrowing constraints. The top 5 percent ratio rose, consistent with consumption smoothing. The inability of the bottom 95 percent to generate adequate demand helps explain the slow recovery.

Number of Pages in PDF File: 44

Keywords: consumption, saving, inequality, aggregate demand

JEL Classification: D12, D31, E21

working papers series


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Date posted: January 23, 2013 ; Last revised: March 20, 2014

Suggested Citation

Cynamon, Barry Z. and Fazzari, Steven M., Inequality, the Great Recession, and Slow Recovery (March 19, 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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References:  41
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