Poverty and income inequality

Nora Lustig, Nancy Birdsall, 02 April 2020

The pandemic has created a new, brutal inequality: between those who have a steady source of income and those who do not. This column provides some examples of how the plight of the latter is inspiring a new kind of informal, people-to-people social protection. While this is not a substitute for a publicly financed social safety, it can fill critical gaps and foster the solidarity and trust that is key to citizens’ support for more comprehensive social protection during the next crisis.

Mark Stabile, Bénédicte Apouey, Isabelle Solal, 01 April 2020

While some countries have provided assistance to workers unable to perform tasks from home during the COVID-19 pandemic, certain categories of workers tend to fall through the cracks of these programmes. This column reports the findings of a survey of precarious workers in France, including gig economy workers such food delivery bikers. Traditional gig economy workers with incomes under €1,000 a month were more likely to keep working despite the highly elevated health risk of doing so, suggesting that the support in place is leaving some low-income workers exposed.

Nicolas Woloszko, Orsetta Causa, 31 March 2020

Rising house prices are causing a housing affordability crisis in many countries, but at the same time they are increasing homeowners’ wealth. Governments are faced with the challenge to encourage households to build up housing wealth while also fostering access to good-quality affordable housing. This column shows that, across OECD countries, those countries with higher homeownership rates display much lower wealth inequality, but argues that encouraging homeownership will not help low- and middle-income families accumulate wealth and are likely to conflict with other important policy objectives.

Tim Besley, Isabelle Roland, John Van Reenen, 09 March 2020

Since the Global Crisis, there has been a renewed awareness of how frictions in credit markets can damage economic efficiency due to a higher cost of capital and/or capital being misallocated away from its most productive uses. This column presents a new methodological approach for calculating the cost of credit frictions which can be implemented with relatively simple data in multiple contexts. It finds that credit market frictions explain half of the fall in UK productivity in the Great Recession and depress output by 28% on average.

Christian Bayer, Benjamin Born, Ralph Luetticke, 26 February 2020

How much does inequality matter for the business cycle and vice versa? This column explores the two-way relationship using a heterogeneous agent New Keynesian model estimated on both the macro and micro data. Although adding data on wealth and income inequality may not materially change the estimated shocks driving the US business cycle, the estimated business cycle shocks themselves are useful for explaining the evolution of US wealth and income inequality from the 1950s to today.

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