Income inequality as a cause of the Great Recession?
We argue that the ways in which consumers react to changes in relative income depend on such institutional factors as the deepness and regulation of the credit markets, the organisation of the labour market and the education and welfare systems, and the reactivity of monetary and fiscal policy to unemployment. We conclude that reducing inequality in these countries is crucial for overcoming macroeconomic instability and the global and European current account imbalances over the longer term.
Reading Development 