Working Papers

2017-23 | March 2022


Historical Patterns of Inequality and Productivity around Financial Crises


To understand the determinants of financial crises, previous research focused on developments closely related to financial markets. In contrast, this paper considers changes originating in the real economy as drivers of financial instability. To this end, I assemble a novel data set of long-run measures of income inequality, productivity, and other macrofinancial indicators for advanced economies. I find that rising top income inequality and low productivity growth are robust predictors of crises, and their slowmoving trend components largely explain these relations. Moreover, recessions that are preceded by such developments are deeper than recessions without such ex-ante trends.

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Article Citation

Paul, Pascal. 2017. "Historical Patterns of Inequality and Productivity around Financial Crises," Federal Reserve Bank of San Francisco Working Paper 2017-23. Available at