Inequality can worsen recessions – BIS paper

The Bank for International Settlements, Basel
The Bank for International Settlements, Basel
Photo: Ulrich Roth

Income inequality can make recessions significantly deeper, research published by the Bank for International Settlements finds.

Income inequality and the depth of economic downturns, by Emanuel Kohlscheen, Marco Jacopo Lombardi and Egon Zakrajšek, explores data on 91 advanced and emerging economies from 1981 to 2019. The authors distinguish between expansionary and contractionary periods of the business cycle, and between financial crashes and “normal” downturns.

They find evidence that

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