Title: Inequality and finance in a rent economy
Authors: Alberto Russo - Universita Politecnica delle Marche (Italy) [presenting]
Alberto Botta - University of Greenwich (United Kingdom)
Eugenio Caverzasi - Universita Politecnica delle Marche (Italy)
Mauro Gallegati - Universita Politecnica delle Marche (Italy)
Joseph Stiglitz - Columbia University (United States)
Abstract: The aim is to contribute to the understanding of the interactions between finance and inequality. We investigate the ways through which income and wealth inequality may have influenced the development of modern financial systems in advanced economies, the US economy first and foremost, and how modern financial systems have then fed back on income and wealth distribution. We focus in particular on securitization and on the production of complex structured financial products. We analyse this topic by elaborating a hybrid Agent-Based Stock-Flow-Consistent (AB-SFC) macroeconomic model, encompassing heterogenous (i.e. households) and aggregate sectors. Our findings suggest that the increase in economic growth, favoured by the higher levels of credit supply coming with securitization, may determine a more unequal and financially unstable economic system. We also find that a lower degree of tax progressiveness and wider wage inequality further polarize income and wage distribution, and reduce economic growth.