{
  "title": "Inequality, Leverage and Crises",
  "publication": "IMF Working Papers, November 1, 2010",
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  "summary": "The paper studies how high 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 the rich, a large increase in leverage for the remainder, and an eventual financial and",
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    {
      "heading": "Summary",
      "content": "- The paper studies how high leverage and crises can arise as a result of changes in the income distribution.\n- Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis.\n- The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes.\n- A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction.\n- Restoration of the lower income group's bargaining power is more effective."
    },
    {
      "heading": "Empirical findings",
      "content": "- Periods analyzed: 1920-1929 and 1983-2008.\n- Observed co-movements in these periods:\n  - Large increase in the income share of the rich.\n  - Large increase in leverage for the remainder.\n  - Eventual financial and real crisis."
    },
    {
      "heading": "Theoretical model and mechanisms",
      "content": "- The model generates high leverage and crises endogenously as a result of a shift in bargaining powers over incomes.\n- Bargaining-power shifts alter income distribution, producing macrofinancial dynamics that can culminate in crises."
    },
    {
      "heading": "Policy-relevant conclusions",
      "content": "- A very large financial crisis that is not accompanied by a real contraction can reduce leverage.\n- Restoring the lower income group's bargaining power is presented as a more effective way to address leverage buildup and crisis risk.\n\n---\n\n Content in this bundle\n\n- wp10268\n  - wp10268 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp10268 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/inequality-leverage-and-crises-24378"
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    "Authors: Romain Ranciere, Michael Kumhof",
    "Published: November 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781455210756.001",
    "The paper studies how high 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 the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis.",
    "The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes.",
    "A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction.",
    "Restoration of the lower income group's bargaining power is more effective.",
    "Periods analyzed: 1920-1929 and 1983-2008.",
    "Observed co-movements in these periods:",
    "The model generates high leverage and crises endogenously as a result of a shift in bargaining powers over incomes.",
    "Bargaining-power shifts alter income distribution, producing macrofinancial dynamics that can culminate in crises.",
    "A very large financial crisis that is not accompanied by a real contraction can reduce leverage.",
    "Restoring the lower income group's bargaining power is presented as a more effective way to address leverage buildup and crisis risk.",
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