Inequality and Macroeconomics

Data show relevant interactions between inequality and macroeconomic aggregates and cycles.
🔘 Does the existence of inequality change how we should think about macroeconomic policies?
🔘 Are recessions more severe in more unequal countries?
Benjamin Moll from Princeton University discusses the traditional view on the interactions between macroeconomic and inequality showing that they both affect each other in a relevant way. Even though this appears straightforward, it has only recently been recognised in mainstream macroeconomics.
Recent data bring significant evidence on the way inequality shapes macroeconomic aggregates and, conversely, on the way macroeconomic shocks and policies affect inequality. Incorporating the enormous heterogeneity observed at the micro level, and in particular the large disparities in income and wealth, often delivers strikingly different implications for monetary and fiscal policies and allows us to study their distributional implications.