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Causes of the Great Recession of 2007-9: The Financial Crisis is the Symptom not the Disease!

Author

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  • Ravi Jagannathan
  • Mudit Kapoor
  • Ernst Schaumburg

Abstract

Globalization has made it possible for labor in developing countries to augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that this large increase in the developed world's effective labor supply, triggered by geo-political events and technological innovations, coupled with the inability of existing institutions in the US and developing nations themselves to cope with this shock set the stage for the great recession. The financial crisis in the US was but the first acute symptom.

Suggested Citation

  • Ravi Jagannathan & Mudit Kapoor & Ernst Schaumburg, 2009. "Causes of the Great Recession of 2007-9: The Financial Crisis is the Symptom not the Disease!," NBER Working Papers 15404, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15404
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    References listed on IDEAS

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    1. Edward N. Wolff, 2007. "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze," Economics Working Paper Archive wp_502, Levy Economics Institute.
    2. repec:aei:rpaper:30944 is not listed on IDEAS
    3. F. A von Hayek, 1932. "A Note on the Development of the Doctrine of "Forced Saving"," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 47(1), pages 123-133.
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    Cited by:

    1. Christophe André, 2010. "A Bird's Eye View of OECD Housing Markets," OECD Economics Department Working Papers 746, OECD Publishing.
    2. Bagliano, Fabio C. & Morana, Claudio, 2012. "The Great Recession: US dynamics and spillovers to the world economy," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 1-13.
    3. Francesco Sarracino & Małgorzata Mikucka, 2019. "Consume More, Work Longer, and Be Unhappy: Possible Social Roots of Economic Crisis?," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 14(1), pages 59-84, March.
    4. Fligstein, Neil & Goldstein, Adam, 2012. "The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown," Institute for Research on Labor and Employment, Working Paper Series qt2zx8r7fb, Institute of Industrial Relations, UC Berkeley.
    5. Acharya, Viral & Naqvi, Hassan, 2012. "The seeds of a crisis: A theory of bank liquidity and risk taking over the business cycle," Journal of Financial Economics, Elsevier, vol. 106(2), pages 349-366.
    6. Amato, Amedeo & Consigliere, Isabella, 2010. "Globalisation and Development in the Encyclical Caritas in Veritate - Globalizzazione e sviluppo nell’enciclica Caritas in Veritate," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(2), pages 143-167.
    7. Ross Levine, 2010. "An Autopsy of the U.S. Financial System," NBER Working Papers 15956, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G0 - Financial Economics - - General
    • G00 - Financial Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G2 - Financial Economics - - Financial Institutions and Services

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