International Comparison On The Distributional Effects Of Financial Crises

The U.S. subprime crisis has evolved into a global financial crisis in 2008 when the economic recession and social unrest caused by 1997 Asian financial crisis and the Latin American financial crisis in 2003 are still vivid. There were 44 and 95 times of financial crises in developed and developing countries respectively during the period from 1973 to 1997. The outbreak of financial crises brings adverse effects on all aspects of social life, such as the outreach of poverty and the deterioration in income distribution. The distributional effects of different crises differ from each other, thus a comparative analysis must be of great significance.This dissertation, from the viewpoint of financial crisis's impact on income distribution, firstly analyses the channels and mechanism that income distribution influenced by financial crises in order to support the establishment of a theoretical framework. Then it presents empirical analysis about the distributional effects of four typical financial crises in Japan, America, Asian countries, and Mexico respectively and finds out their similarities and differences. The results indicate that crises tend to raise inequality, but they raise it more in developing countries and emerging economies, and less in developed countries. Moreover, the distributional effects of financial crises are reflected not only after their outbreak but also during their brewing process. Finally, this dissertation studies the policies of income distribution and emphasizes the importance of establishing and perfecting the social security system with a country's economic development and income distribution based on the practical situation in China.Through in-depth analysis, this dissertation concludes that a sound social security system is the most effective tool to tackle financial crises. First of all, a sound social security system enhances the ability of residents to address crises. Residents'income and consumption, as well as the situation of income distribution, have not been affected due to the subsidies and taxes relief provided by the joint effort of social security system and emergent supporting programs in both United States and Japan. Secondly, the Mexican financial crisis during 1994 and 1995 indicates that the distributional effects may be manifested during the brewing process of financial crises. This demonstrates that supporting programs made after the outbreak of financial crises are always not enough. A sound social security system is the most effective way to deal with financial crises.