Equity Prices. The Missing Link between Income Inequality and Financial Crises?

Inhaltsverzeichnis (Table of Contents)

• 1. Introduction
• 2. A Theoretical Framework
  • 2.1. Asset Prices, Credit and Financial Crises
  • 2.2. Asset Prices and Income Inequality
  • 2.3. Income Inequality and Credit Growth
• 3. Asset Prices and their Relation to Credit Growth and Financial Risk
  • 3.1. Collateral
  • 3.2. Wealth Effect
  • 3.3. Bank Capital
  • 3.4. Excessive Credit
  • 3.5. Interest Rates
• 4. Income Inequality and Equity Prices
  • 4.1. Wage Determination
  • 4.2 Capital Income and Capital Gains
• 5. Inequality as a Cause of Financial Distress? An Assessment of Recent Literature.
• 6. An Econometric Model: Determinants of Income Inequality
  • 6.1. Data Description and Pretesting
  • 6.2. Estimator Choice and Results
  • 6.3. Robustness Tests
  • 6.4. Implications for the Relationship between Income Inequality and Banking Crises
• 7. Conclusion

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper examines the systematic relationship between financial crises and income inequality, arguing that equity price booms, which precede financial crises, generate income disproportionately for the top of the income distribution. The study aims to establish a theoretical framework that explains this relationship, analyze the implications of the findings for inequality during times of crises, and empirically test the link between equity prices and top income shares using a panel of 18 advanced economies between 1913 and 2011.

• The relationship between financial crises and income inequality.
• The role of equity price booms in generating income inequality.
• The impact of equity prices on various income sources, including dividends, capital gains, and executive compensation.
• The link between equity prices and financial stability.
• The empirical analysis of the relationship between equity prices and top income shares.

Zusammenfassung der Kapitel (Chapter Summaries)

• Chapter 1: Introduction This chapter introduces the research question and the motivation behind it. It discusses the link between income inequality, debt-led growth, and financial crises. The chapter highlights the role of asset price booms and busts in financial crises and proposes equity prices as a potential link between crises and income inequality.
• Chapter 2: A Theoretical Framework This chapter presents the theoretical framework that links income inequality and financial crises through equity prices. It argues that equity price booms disproportionately benefit the top of the income distribution, contributing to income inequality. The chapter also discusses the relationship between asset prices, credit, and financial crises.
• Chapter 3: Asset Prices and their Relation to Credit Growth and Financial Risk This chapter explores the relationship between asset prices, credit growth, and financial risk. It examines how factors like collateral, wealth effects, bank capital, excessive credit, and interest rates influence this relationship.
• Chapter 4: Income Inequality and Equity Prices This chapter focuses on the relationship between equity prices and income inequality. It examines how equity prices affect different sources of income, including dividends, capital gains, and executive compensation. The chapter argues that equity price booms can lead to increased income inequality.
• Chapter 5: Inequality as a Cause of Financial Distress? An Assessment of Recent Literature This chapter critically assesses the potential causal relationship running from income inequality to financial crises, drawing on recent literature. It analyzes the arguments and evidence surrounding this relationship.
• Chapter 6: An Econometric Model: Determinants of Income Inequality This chapter presents an econometric model to analyze the link between equity prices and income inequality. It describes the dataset used, tests the proposed relationship, and discusses the implications and limitations of the findings.

Schlüsselwörter (Keywords)

This study focuses on the relationship between income inequality and financial crises, exploring the role of equity prices as a potential link. The study investigates the impact of equity price booms on top income shares, analyzes the determinants of income inequality, and examines the implications of the findings for financial stability and crisis prevention. Key themes include income inequality, financial crises, equity prices, asset prices, credit growth, and financial risk.