Income Inequality and Wealth Concentration in the Recent Crisis

What is it about?

This article shows that the increase of income inequality and global 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 growing debt levels. Rising wealth concentration contributed to the crisis because the increasing asset demand from the rich played a key role in the growth of the structured credit market and enabled poor and middle-income households to accumulate increasing amounts of debt.

Featured Image

Why is it important?

Our analysis puts both income and wealth inequality at the epicentre of the recent financial and Eurozone crisis, and as crucial for social scientists analysing the causes of the crisis. The findings suggest that the policy response to the crisis should not be limited to financial regulation but must involve policies to address inequality by increasing the bargaining power of labour as well as redistributive tax policies