Wealth Redistribution in Bubbles and Crashes
52 Pages Posted: 19 Jun 2019 Last revised: 13 Jul 2020
Date Written: November 1, 2018
Using comprehensive administrative data from China, we document a substantial increase in inequality of wealth held in risky assets by Chinese households in the 2014-15 bubble-crash episode: the largest 0.5% households in the equity market gain, while the bottom 85% lose, 250B RMB through active trading in this period, or 30% of either group’s initial equity wealth. In comparison, the return differential between the top and bottom groups in 2012-14, a period of a relatively calm market, is an order of magnitude smaller. We examine a number of possible explanations for these findings and discuss their implications.
Keywords: bubbles and crashes, wealth inequality, market participation, social impact
JEL Classification: D14, D31, D91, G11, G51, O16
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