New UTSA study delves into income inequality and inflation
(March 6, 2017) --A new study by Edgar Ghossoub, associate professor of economics at The University of Texas at San Antonio, posits that income inequality, in varying economies, can have substantial positive and negative effects for people in all walks of life depending on what kind of financial system they live under.
Income inequality became a wide public issue after the 2008 financial crisis, which was followed in later years by the Occupy movement. Protesters were especially frustrated with the massive gap in wealth between the millionaires and billionaires of Wall Street and the average American citizen.
"Typically, we have different income groups," Ghossoub said. "The low-income groups hold mainly assets like cash, which comes from their salaries, whereas the richer groups have more money to invest in many different assets."
Ghossoub studied financial systems all over the world to understand the relationship between income inequality and inflation, which is the rising or falling value of money. He found that as a system grows and develops, income inequality tends to rise because people are becoming wealthier while many are remaining poor. However, the size of the country's stock market is also a major factor.
"An economy with a large, active stock market leads to less income inequality compared to one with a smaller stock market," Ghossoub said. "A stock market promotes capital formation, which leads to higher wages and a healthier economy."
Still, the rich benefit from the strength of the stock market as the poor continue to rely solely on their own income, which could be significantly weakened with rising inflation, because their money is worth less. In countries like Mexico, with a smaller stock market but higher inflation, income inequality has a more damaging effect on the populace.
"Normally we associate income inequality with poverty," Ghossoub said. "There's always this feeling of unfairness. If you're rich, you have the resources to defend your interests, but the poor are left behind. If income inequality becomes a larger problem, it can lead to social unrest."
He notes, however, that as long as a nation's economy is moving forward, positive effects will follow.
"Central banks should focus on stabilizing prices to mitigate the effects of financial development on income inequality. When we have financial development, everyone is going to benefit," Ghossoub said. "Some people are always going to benefit more, but as the economy advances the welfare of everyone is going to rise."
Read Edgar Ghossoub's study, "Financial Development, Income Inequality, and the Redistributive Effects of Monetary Policy."
Learn more about the UTSA Department of Economics.
The Academy is targeted at providing instructional tools to create a social studies curriculum with Chicano/Mexican American content.Institute of Texan Cultures, Hemisfair Campus
Orientation marks a major step toward becoming a Roadrunner. It is a unique experience designed to welcome freshmen and transfers to UTSA and ensure a successful transition into college. They will learn about UTSA, prepare for their first semester and have fun meeting other students. There is also a special Family Orientation program too.Various locations, Main and Downtown Campuses
The sympoisum will focus on the interface between aging and neurodegenerative diseases, will educate the wider research community about advancements in this fast-paced field and stimulate collaborative research in this area. Register online for this free event.H-E-B University Center Ballroom (HUC 1.106), Main Campus
The institute this year will focus on being lifelong growers and continually seeking to increase our skills as educators. Sessions will align with daily themes designed to support the lifelong development of educators. The institute is free for everyone.Frio Street Building, Downtown Campus
Annual Enrollment is the period when you may change your benefit elections. The period is July 15 to July 31, 2017. HR Benefits Office will host its Benefits Fair and presentations on July 12 at all three campuses.Business Building, University Room (BB 2.06.04), Main Campus
Annual Enrollment is the period when you may change your benefit elections. The period is July 15 to July 31, 2017. HR Benefits Office will host its Benefits Fair and presentations on July 12 at all three campuses.Frio Building, Riklin Auditorium (FS 1.406), Downtown Campus
Annual Enrollment is the period when you may change your benefit elections. The period is July 15 to July 31, 2017. HR Benefits Office will host its Benefits Fair and presentations on July 12 at all three campuses.Institute of Texan Cultures, Connally Room (ITC 3.01.02), Hemisfair Campus