Over the past two years, “secular stagnation” has been widely discussed within the policy community. Supporters of the secular-stagnation hypothesis believe that demand may be permanently below supply capacity, with low interest rates and inflation targets by central banks preventing real interest rates from falling to the point necessary to restore the supply and demand balance. Widening income inequality has been cited as one cause of secular stagnation. This project will develop a theoretical model to illuminate how income inequality affects aggregate income and therefore economic growth. The model has important implications for economic policy, particularly monetary policy.
Adrien Auclert is an Assistant Professor of Economics at Stanford University. Prior to joining Stanford’s faculty, he was an International Economics Section Fellow in the Department of Economics at Princeton University. He also currently serves as a faculty research fellow at the National Bureau of Economic Research. He received his Ph.D. in economics from the Massachusetts Institute of Technology, and received his M.Sc. in econometrics and mathematical economics from the London School of Economics.
Income inequality has been rising for decades in the United States. While there are many reasons why this trend may be concerning, one particular worry for economists and policymakers is […]