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how did the 2008 recession impact the upper class

2011).Wealth effects also help explain why the housing market crash was so much more severe than the dotcom bust. Some areas were hit harder than others in the Great Recession.

The rich also played a key role in the subsequent recovery.Our results suggest that the standard narrative of the Great Recession may need to be adjusted. But there are reasons to think that a large role was actually played by the rich, as they responded to developments in their overall wealth.According to the traditional narrative, the rich play a role but as generators of ‘excess saving’ (Kumhof et al. Wealth effects played a key role in the pre-crisis drop and post-crisis surge of the household saving rate (Figure 1).

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The Great Recession began well before 2008.

The Great Recession of 2008–09 - The Great Recession of 2008–09 - The U.S. If you were unlucky enough to be in the middle class in places like Atlanta, Houston, or St. Louis, instead of Columbus, Kansas City, or San Antonio, the Great Recession hammered you twice. Much of the slowdown in consumption between 2006 and 2009 was the result of a drop in consumption of the rich. Indeed, the rich may have accounted for the bulk of the swings in aggregate consumption during the boom-bust.Case, K E, J M Quigley, and R Shiller (2011), “Wealth Effects Revisited, 1978–2009”, Cowles Foundation Discussion Paper No 1784.Kumhof, M, R Ranciere, and P Winant (2013), “Inequality, Leverage and Crises: The Case of Endogenous Default”, IMF Working Paper WP/13/249.Mian, A and A Sufi (2014), House of Debt, The University of Chicago Press.Rajan, R (2010), Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press.Petra Gerlach-Kristen, Rossana Merola, Conor O'ToolePetra Gerlach-Kristen, Rossana Merola, Conor O'Toole 2 - 30 September 2020 / Zoom webinar / CEPR and INSEAD 3 - 4 September 2020 / Blavatnik School of Government at University of Oxford (Oxford, UK) / Government Outcomes Lab, Blavatnik School of Government, University of Oxford.

According to the CEX, the aggregate household saving rate increased before the Crisis, by a considerable amount.

But for the middle three quintiles, growth has lagged considerably in the areas that experienced a more severe recession. The economy looks to be on a roll, if recent releases of economic indicators are anything to go by. 2011).Figure 1. The top decile explains the bulk of overall consumption growth (Figure 8). When asset prices collapsed during the crisis, wealth effects went into reverse, leading to drop in consumption (Case et al. This is consistent with the Consumer Expenditure Survey (CEX), which shows that the saving rate of the top quintile averaged 33% during the 2000s, compared with 21% during the 1990s.However, data in the CEX are not consistent with the National Income and Product Accounts (NIPA). If there’s any point of agreement amongst the many ten-year anniversary eulogies of the 2008 recession, it is that at some point the crisis ended.
When asset prices collapsed during the crisis, wealth effects went into reverse, leading to drop in consumption (Case et al.

Middle class stagnation is in the worst-hit areas But there is a geographical element to this story too. The Loss Recession (LR) environment was identical to the GR Housing played a role, but so did financial assets, which actually accounted for the bulk of the loss in wealth. They were responding to the surge in their wealth. Our status, self-worth, health, and well-being can be drastically impacted by the loss of a job.While many who lose their jobs use the time for growth and exploration, many suffer with depression, alcoholism, and denial. 2013) and not as part of the spending boom-bust. We have to explain why the aggregate household saving rate declined in the pre-crisis years, even as there was a shift in income distribution towards the (presumably) high-saving rich. So the rich lent their ‘increased’ savings to the middle class, who used the funds to maintain their consumption growth (Rajan 2010) and speculate in real estate. Initially, all was well, as the real estate boom propelled a construction-based expansion. Household net worth and saving rate (% o… But by 2007, the music had stopped.
The Gain Recession (GR) environment was identical to GB en-vironment except for minor design modi cations; however, these ex-periments were conducted in the fall of 2011, when the US economy remained mired in the recession that set in during 2008.

This column argues that a large role was actually played by the rich. It is not too surprising that wage growth was highest in the top quintile—this element of economic polarization is But there is a geographical element to this story too. Many academic papers about the Great Recession in the US have focused on the boom-bust in housing wealth and how it affected spending of the middle class. Some areas were hit harder than others in the Great Recession. Indeed, for the second and third quintiles in the harder hit areas, wage growth averaged a paltry 0.3 percent a year, barely more than half the pace for the middle class in the less affected areas.Nationally, middle-class workers have lost ground compared to earners at the bottom and the top. In line with the inequality narrative, we assume that the marginal propensity to consume income for the rich is lower than that of the poor.

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