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1. Asset Ownership, Rates of Return, and the U.S. Working Class

Author:
Leila Davis and Charalampos Konstantinidis
Publication Date:
12-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this paper, we analyze the intersection of asset market participation and inter-class wealth inequality in the United States by showing that working-class households earn lower rates of return on their assets than non-working-class households. We, first, operationalize an empirical definition of working-class status using the Survey of Consumer Finances for 1989-2022. Using this classification, we, second, document that inter-class income and wealth inequality have risen since 1989. Third, we show that, with the exception of business assets, working-class households hold similar asset classes as non-working-class households and receive financial income. However, working-class households receive a 2.5 percentage point lower average rate of return than non-working-class households, conditional on observable demographic and economic differences across classes. This gap reflects differential returns on businesses and real estate. These results suggest that expanded asset market access in the U.S. has conferred unequal benefits by class status and widened inequalities along class lines.
Topic:
Markets, Inequality, Assets, and Working Class
Political Geography:
North America and United States of America

2. The European Banks’ Role in the Financial Crisis of 2007-8: A Critical Assessment

Author:
Photis Lysandrou
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Since the outbreak of the financial crisis in 2007, opinion has been divided over whether its root cause was credit arbitrage or safe asset demand. New research on the European banks' role in the crisis may finally help to resolve the issue. Far from being peripheral players in the crisis, European banks were deeply implicated in its causal origins as evidenced by their activities in the two US debt markets that were at the heart of the crisis: those for collateralised debt obligations (CDOs) and for asset backed commercial paper (ABCP). These activities would seem to lend weight to the credit arbitrage story, a conclusion that has been reached by several authors. However, it is a conclusion only made possible by ignoring the connection between the federal funds rate and the rate of ABCP demand from the institutional money market mutual funds (MMMFs) in the pre-crisis era. This paper argues that when this connection is closely examined, it turns out that the evidence surrounding the European banks' role in the financial crisis gives greater weight to the safe asset demand explanation of the crisis.
Topic:
Markets, Financial Crisis, Banks, Debt Securities, Assets, and Federal Funds Rate
Political Geography:
Europe and United States of America