This is the updated reading list for the final class of PO4730.

4.9 Inequality and the Financial Crisis

For this final topic, we will look at the relationships between economic inequality and the financial crisis that has unfolded since around 2007/2008. The sovereign debt crises that have emerged from the original private sector financial problems have had large impacts on public expenditure — and so redistributive programmes. However, it has also been argued that inequality itself was an important cause of the original financial crisis in the USA. We will examine these issues. N.B. Readings may be updated at a later date for this topic as scholarly work in this field is still emerging.

Shorter/Popular Readings (Required)

• The Economist (2011). The beautiful and the damned. January 20th.
• The Economist (2010e). What’s income inequality got to do with it?. Democracy in America Blog. August 26th.
• The Economist (2010c). How inequality fueled the crisis. Free Exchange Blog. August 26th.
• The Economist (2010a). How egalitarian policy fueled the crisis. Democracy in America Blog. August 26th.
• The Economist (2010b). How exactly did inequality fuel the crisis?. Democracy in America Blog. August 27th.

Required Readings

• Rajan, Raghuram G. (2010). Fault Lines: How Hidden Fractures Still Threaten the World Economy. Princeton University Press, Princeton, NJ, Introduction and Chapter 1
• Krugman, Paul and Wells, Robin (2010a). The Slump Goes On: Why? New York Review of Books.
• Krugman, Paul and Wells, Robin (2010b). The Way Out of the Slump. New York Review of Books.
• Atkinson, A. B. and Morelli, Salvatore (2011). Economic Crises and Inequality. Paper prepared for the 2011 Human Development Report, funded by the United Nations Development Programme.

Further Readings

• Honohan, Patrick (2009). What Went Wrong in Ireland? Paper prepared for the World Bank.
• Bordo, Michael D. and Meissner, Christopher M. (2012). Does Inequality Lead to a Financial Crisis? NBER Working Paper 17896.
• This American Life (2009a). Episode 375: Bad Bank. WBEZ Radio.
• This American Life (2009b). Episode 382: The Watchmen. WBEZ Radio.
• This American Life (2009c). Episode 390: Return to the Giant Pool of Money. WBEZ Radio.
• This American Life (2010). Episode 418: Toxie. WBEZ Radio.
• * Mian, Atif, Sufi, Amir, and Trebbi, Francesco (2010). The Political Economy of the Sub-prime Mortgage Credit Expansion. NBER Working Paper No. 16107.