High Income Inequality Makes Recessions a Little Worse


A new paper investigates the association between income inequality and recessions over the past 40 years:

It would appear that a less equal income distribution leads to deeper and more costly recessions. Overall, the length of the duration of contraction when going into a recession is longer and its amplitude deeper for countries with a less equal distribution of income.

But by how much? The authors use the World Bank’s GINI score and conclude that a one point increase in GINI leads to a 0.26 percent increase in the depth of a recession and a 0.2 percent increase in cumulative losses over the course of a recession. In other words, the effect is noticeable but not huge.

To make this a little more concrete, here’s a chart that shows how the authors would expect recessions in various countries to compare to a recession in Denmark, which has a very low GINI score. For the United States, other things equal, we should expect that our recessions would be about 3 percent deeper and produce 2 percent more losses than a recession in Denmark.

One More Thing

And it's a big one. Mother Jones is launching a new Corruption Project to do deep, time-intensive reporting on the corruption that is both the cause and result of the crisis in our democracy.

The more we thought about how Mother Jones can have the most impact right now, the more we realized that so many stories come down to corruption: People with wealth and power putting their interests first—and often getting away with it.

Our goal is to understand how we got here and how we might get out. We're aiming to create a reporting position dedicated to uncovering corruption, build a team, and let them investigate for a year—publishing our stories in a concerted window: a special issue of our magazine, video and podcast series, and a dedicated online portal so they don't get lost in the daily deluge of headlines and breaking news.

We want to go all in, and we've got seed funding to get started—but we're looking to raise $500,000 in donations this spring so we can go even bigger. You can read about why we think this project is what the moment demands and what we hope to accomplish—and if you like how it sounds, please help us go big with a tax-deductible donation today.

We Recommend

Latest

Sign up for our newsletters

Subscribe and we'll send Mother Jones straight to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate