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."
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Read Edgar Ghossoub's study, "Financial Development, Income Inequality, and the Redistributive Effects of Monetary Policy."
Learn more about the UTSA Department of Economics.
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Events
The Racial Justice Book Club was established at UTSA by members of the campus community to explore social justice following acts of racial violence across the nation over the last few years. We are reading The Injustice Never Leaves You: Anti-Mexican Violence in Texas by Monica Muñoz Martinez. We will meet every Wednesday in September and October at 2 pm on Zoom.
Virtual EventThe touring ensemble of five London actors will perform Shakespeare’s _Macbeth in the UTSA Recital Hall.
Recital Hall, Main CampusSession for parents to learn about how to prepare for their children's future in higher education.
Buena Vista Street. Building (BVB 1.326,) Downtown CampusCelebrate Hispanic Heritage Month at our very own street fair - Calle UTSA. We will have activities, performances, food, music, and piñatas to break open.
Student Union Paseo"La Plática" is a space for thoughtful dialogue to build a sense of connection among the Roadrunner Community by getting to know each other better and sharing what's on our minds and about ourselves to increase to increase awareness of diverse perspectives.
Virtual EventThis September 30, the Friday Series will feature Prof. Milena Ang, who will be presenting A Tren to Nowhere: Statistic Development and the Politics of Racial, a paper co-authored with Tania Islas-Weistein where they discuss Mexico's long history of state-led development projects that contribute to economic and racial inequality. The authors argue that despite professing racial justice, official discourses surrounding the Tren Maya reproduce existing symbolic and material forms of racism.
McKinney Humanities (MH 4.01.01,) Main CampusWe invite you to learn about the process of screenwriting and explore the intersection of identity and pursuing dreams from Jorge Ramirez-Martinez and Raymond Perez, screenwriters for the Selena: The Series, released on Netflix. They will discuss their careers and writing process, including how their identities as Mexican American and gay men have shaped their professional experiences.
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