A Case for Redistribution? Income Inequality and Wealth Concentration in the Recent Crisis

Center for Research in Economics and Finance (CIEF), Working Papers, No. 14-17

29 Pages Posted: 27 Aug 2014

See all articles by Thomas Goda

Thomas Goda

Universidad EAFIT; Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Ozlem Onaran

Istanbul Technical University - ITU Isletme Fakultesi

Engelbert Stockhammer

Vienna University of Economics and Business

Date Written: August 25, 2014

Abstract

Several Nobel laureates economists have called for redistributive policies. This paper shows that there is a strong case for redistributive policies because the global increase of income inequality and wealth concentration was an important driver for the financial and Eurozone crisis. The high levels of income inequality resulted in balance of payment imbalances and rising debt levels. Rising wealth concentration contributed to the crisis because the increasing asset demand from the rich played a key role in the rise of the structured credit market and enabled poor and middle-income households to accumulate increasing amounts of debt. To tame the inherent instability of the current mode of capitalism it is necessary to reduce inequality.

Keywords: Financial crisis, Eurozone crisis, distribution, income inequality, wealth concentration, redistribution

JEL Classification: D31, G01, E25

Suggested Citation

Goda, Thomas and Onaran, Ozlem and Stockhammer, Engelbert, A Case for Redistribution? Income Inequality and Wealth Concentration in the Recent Crisis (August 25, 2014). Center for Research in Economics and Finance (CIEF), Working Papers, No. 14-17 . Available at SSRN: https://ssrn.com/abstract=2486874 or http://dx.doi.org/10.2139/ssrn.2486874

Thomas Goda (Contact Author)

Universidad EAFIT ( email )

School of Economics and Finance
Carrera 49 Número 7 Sur 50
Medellín, Antioquia -
Colombia
(57) (4) 2 61 95 00 - 8664 (Phone)

HOME PAGE: http://www.eafit.edu.co

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Ozlem Onaran

Istanbul Technical University - ITU Isletme Fakultesi ( email )

Macka 80680
Turkey
+90 212 293 13 00 / 2790 (Phone)
+90 212 240 72 60 (Fax)

Engelbert Stockhammer

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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