Jacob Robbins: Income Inequality and Saving Rates

Jacob Robbins was supported in the fall of 2016 to focus full-time on research with Professor David Weil into how increased income inequality has translated into changes in savings rates and capital accumulation, and their potential impact on macroeconomic stability. On average, the rich save a larger proportion of their income and see larger wealth accumulation in their lifetime, whereas the middle class and poor spend more of their income or use credit. As the savings rate among the wealthy in the U.S. increases, interest rates are driven down. That could have large macroeconomic consequences and possibly lead to deeper, longer-lasting recessions, because the government fights recessions by lowering interest rates. With already low rates, it’s difficult to lower them significantly. The two research papers that came out of this work have been presented at top conferences, including the NBER Summer Institute and the Tsinghua Conference on Macroeconomics in Beijing. This is work which is co-authored with two other professors at Brown, Gauti Eggertsson and Neil Mehrotra. Based on this research, Robbins was awarded a fellowship from the Center for Equitable Growth, which supports research related to economic inequality.

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