Income inequality may have big costs for economy, country

A small group of economists are trying to study whether income inequality may have contributed to the economic collapse. The income gap in the years leading up to the recent recession, which is often compared to the Great Depression, has a striking resemblance to the income equality in 1928, when the top 10 percent of earners received nearly half of the total income. Finance reporter Louise Story wrote about this theory for The New York Times earlier in August, and we spoke with her about the income gap on The Takeaway last week.

Today, we look at the income disparities on a state-by-state basis and examine how gaps in income contribute to social and financial crises. Ray Brescia from Albany Law School recently published a study called, “The Cost of Inequality.”

Bresica and Story explain the impact of income inequality on the financial sector and why connecting the two can be difficult for economists.