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.


Mother Jones was founded as a nonprofit in 1976 because we knew corporations and the wealthy wouldn't fund the type of hard-hitting journalism we set out to do.

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation today so we can keep on doing the type of journalism 2019 demands.

We Recommend


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.


Support our journalism

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


We have a new comment system! We are now using Coral, from Vox Media, for comments on all new articles. We'd love your feedback.