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More Risk, Greater Wealth Inequality

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Abstract

The last three decades have been characterized by both rising wealth inequality and growing retirement income inadequacy, as a rising share of household s is expected to be unable to maintain its standard of living in retirement. At the same time, labor market risks—longer spells of unemployment and less stable earnings—and financial market risks—larger boom-and-bust cycles in the stock and housing markets—have gone up, too. And, as established in chapter 2, households have become more exposed to the potential fallout from these market risks.

Keywords

Risk Exposure Market Risk Earning Growth Wealth Inequality Asset Ratio 
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Notes

  1. 6.
    For a summary of the basic portfolio theoretical arguments and some evidence, see Luigi Guiso, Tullio Jappelli, and Daniele Terlizzese, “Income Risk, Borrowing Constraints, and Portfolio Choice,” The American Economic Review 86, no. 1 (1996), 158–172;Google Scholar
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  9. 7.
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    Remember that the underlying argument is that lower liquidity constraints theoretically should have made it easier for households to reallocate their risky and illiquid housing assets. Instead, households increasingly borrowed to finance consumption. Atif R. Mian and Amir Sufi, “House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis,” American Economic Review 101, no. 5 (2011), 2132–2156;CrossRefGoogle Scholar
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© Christian E. Weller 2016

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