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Research project

FaI - Finance and inequality

The EUI Widening Europe Programme initiative, backed by contributions from the European Union and EUI Contracting States, is designed to strengthen internationalisation, competitiveness, and quality in research in the so-called Widening countries, and thus foster a more cohesive European Higher Education and Research area.

Growing income inequality has been a serious concern for academics and policy makers. Different forms of financial frictions are often singled out as a culprit for these trends. In this project, we revisit the extensive and seemingly conflicted literature and construct and quantify a general equilibrium model that integrates multiple mechanisms, includes household finance, labour choices and capital deepening in production.

Our objective is to evaluate comprehensively – empirically, theoretically, and quantitatively – how different aspects of financial markets shape the income and welfare of households with different education and labour market skills and to understand the macroeconomic impact of alternative financial reforms on a country’s overall income distribution. In this project we study the impact of three major waves of financial deregulation that took place in the US economy from the mid-1970s to the early 2000s.

External Partners