GRK 2281:  The Macroeconomics of Inequallity

• Subject Area: Economics
• Term: from 2018 to 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 310953160

Economic inequality is a defining characteristic of our times. Most indicators of incomeand wealth concentration show a substantial widening of economic inequality in industrializedeconomies in recent decades, making inequality a highly debated political phenomenonand prompting some to diagnose a new “Gilded Age.” The macroeconomicimplications of inequality remain poorly understood, however: does greater inequalityforce us to rethink existing macroeconomic models of aggregate fluctuations, for example?And what implications does inequality have for our theories of financial stability,and for monetary and fiscal policy?In its research program, the group’s first goal is to provide a solid empirical groundingthrough an in-depth analysis of the different dimensions of rising inequality that arerelevant for macroeconomics. Based on this, the group’s second goal is to extend theprofession’s understanding of how greater inequality changes the dynamic responses ofthe economy to macroeconomic shocks, and to what extent inequality creates new channelsthrough which such shocks can propagate. A third important goal will be to analyzethe linkages between inequality, debt, and financial fragility. In particular, we analyze ifand how increasing inequality may make the economy more prone to “excessive” debtaccumulation in the build-up of a financial crisis as well as how inequality matters for therecovery from such a crisis. All of this will enable us to address our fourth goal, namely,understanding what rising inequality implies for the design of macroeconomic policies,having in mind both their effectiveness for the aggregate and the policies’ distributionalimpacts.In pursuing these goals, the group will train researchers who will acquire the tools forpushing the boundaries of our understanding of one of the most pressing topics of ourtime, and who can pursue independent research above and beyond their time in thegroup. At the same time, they will acquire the knowledge needed to advise economicpolicy makers with respect to the macroeconomic consequences of inequality.To achieve these goals, the RTG will bring together a critical mass of internationally visiblesenior and junior researchers and doctoral students to study the macroeconomics ofinequality in a group that has expertise in key aspects of the topic: the use of microeconomicdata in macroeconomic analysis, the links between financial markets and themacroeconomy, and the study of business cycle models with heterogeneous agents.

• DFG Programme: Research Training Groups
• Applicant Institution: Rheinische Friedrich-Wilhelms-Universität Bonn
• Spokesperson: Professor Dr. Christian Bayer
• Participating Researchers: Dr. Benjamin Born, until 6/2018; Professor Dr. Thomas Hintermaier; Professor Dr. Fabian Kindermann, until 8/2018; Professor Dr. Keith Kuester; Professor Dr. Moritz Kuhn; Professorin Dr. Pia Pinger, until 8/2019; Professorin Dr. Isabel Schnabel, until 11/2020; Professor Dr. Moritz Schularick; Professor Petr Sedlacek, Ph.D., until 8/2017