• AEA in the news
  • September 30, 2016

Clinton’s claim that the Bush tax cuts played ‘a large part’ in sparking 2008 recession

picture waterfall/Bigstock

A Washington Post fact check cited a study about the role of inequality in debt and financial crises that appeared in the American Economic Review last year. In Inequality, Leverage, and Crises, the authors develop a theoretical model where growing inequality leads low- and middle-income households to take on more debt. The result can be greater risk of a financial crisis when income inequality grows, as it did in the 25 years leading up to the 2008 crash.