Year: 2013
Type: article
Abstract: The paper studies how high household leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of high-income households, a large increase in debt leverage of the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where higher leverage and crises arise endogenously in response to a growing income share of high-income households. The model matches the profiles of the income distribution, the debt-to-income ratio and crisis risk for the three decades prior to the Great Recession.
Source: IMF Working Paper
Authors: Michael Kumhof, Romain Ranciere, Pablo Winant
Institution: International Monetary Fund
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2953447161