This study tests whether income inequality creates greater volatility in stock prices across a broad sample of countries. Contrary to the idea that inequality creates social and political uncertainty that is reflected in higher volatility, we instead find a negative association between...

The idea that information frictions amplify business cycles is hard to evaluate because information is not easily measured. We propose a quantifiable information friction that amplifies output fluctuations. In our simple model of decentralized trade, income dispersion measures uncertainty about...

By introducing external consumption habits and Limited Asset Market Participation in an otherwise standard New Keynesian DSGE model we uncover a causality link between limited asset market participation, consumption inequality and macroeconomic volatility. We also obtain that monetary...

We generalize the canonical permanent-transitory income process to allow for infrequent shocks. The distribution of income growth rates can then have a discrete mass point at zero and fat tails as observed in income data. We provide analytical formulas for the unconditional and conditional...

The focus of this paper is the link between income volatility and the accumulation of human capital in the presence of credit constraints. Also, the effect of income inequality on the accumulation of human capital within the same framework is studied