Template-Type: ReDIF-Paper 1.0
Author-Name: Emanuel Kohlscheen
Author-X-Name-First: Emanuel
Author-X-Name-Last: Kohlscheen
Author-Name: Marco Jacopo Lombardi
Author-X-Name-First: Marco Jacopo
Author-X-Name-Last: Lombardi
Author-Name: Egon Zakrajšek
Author-X-Name-First: Egon
Author-X-Name-Last: Zakrajšek
Title: Income inequality and the depth of economic downturns
Abstract: Using an international panel data set, we analyze the implications of rising income inequality for aggregate consumption. We document that greater concentration of (after-tax) income in the top decile is associated with a significantly larger and more persistent contraction in consumption in the aftermath of economic downturns. These findings are consistent with lower propensities to consume among wealthier households and imply that disparities in income flows at turning points of the business cycle can significantly influence macroeconomic outcomes.
Length: 16 pages
Creation-Date: 2021-05
File-URL: https://www.bis.org/publ/work943.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work943.htm
File-Format: text/html
Number: 943
Keywords: consumption, income inequality, recessions, financial crises, cross-country evidence
Classification-JEL: D31, E20, E32
Handle: RePEc:bis:biswps:943