A comparative review of the role of income inequality in economic crisis theories and its contribution to the financial crisis of 2007-2009.

Abstract

It is widely accepted that inequality has increased sharply recently in developed countries, but no consensus exists so far about the importance of inequality in the financial crisis of 2007-2009. The aim of this article is to out- line and contrast the theoretical underpinnings of Marxian, post-Keynesian, and mainstream crisis theories, and to compare their viewpoints regarding the role that income inequality played in the crisis. The results of this review suggest that, despite important differences in their theoretical concepts, several economists of these three strands offer a similar explanation on why income inequality was an important contributing factor to the financial crisis.

Keywords

• income inequality
• personal income distribution
• crisis theories
• financial crisis
• schools of economic thought