Abstract:
In the past forty years the US economy experienced large improvements in financial market conditions for households and entrepreneurs, covering both debt and equity market financing. These developments were accompanied by a rapid increase in income and wealth inequality at the top. We are interested to know whether, to what extent and through which channels financial markets improvement can help account for the changes of inequality, and consequently what should be the policy implications. We provide a quantitative model to study this, and use micro-level data to discipline the model.
