The Rich and the Great Recession

December 16, 2014

Preview Citation

Format: Chicago

Bas B. Bakker, and Joshua Felman. The Rich and the Great Recession, (USA: International Monetary Fund, 2014) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Most papers explaining the macro causes of the U.S. Great Recession focus on the behavior of the middle class: how its saving rate declined in the pre-crisis years, then surged following the crisis. This paper argues that the saving rate of the rich followed a similar pattern, the result of wealth effects associated with a boom-bust in asset prices. Indeed, the swings in saving by the rich must actually have played the most important role in the consumption boom-bust, since since the top 10 percent account for almost half of income and two-thirds of wealth. In other words, the rich played a critical role in the Great Recession.

Subject: Consumption, Disposable income, Income, Income distribution, Income inequality, National accounts

Keywords: Business cycles, Consumption, Consumption function, Decline in the saving rate, Disposable income, Global, Income, Income distribution, Income inequality, Income share, Middle class saving, Rate, Saving, Saving data, Saving rate, Saving rise, Saving-investment curve, Wealth, Wealth effect, Wealth inequality, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/225
Stock No:

WPIEA2014225
ISBN:

9781498307376
ISSN:

1018-5941

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