Research on wealth inequality has expanded substantially in recent years as the wealth inequality has reached historically high levels in the post-Global Crisis period. MOreover, the fact that the wealth inequality, as well as income inequality, are found to be one of the causes of financial crises and to have disastrous repercussions on the long-term growth prospects make wealth inequality a very important topic in economics.
On the other hand, our knowledge on the causes and transmission mechanisms of unequal distribution of wealth is still very limited. IN effect, the economics of wealth inequality is a nascent and fertile area of research. ALthough compelling evidence shows that debt, interest, and leverage are important drivers of increasing wealth inequalities, the economics literature is still reluctant to focus on the debt-based system as a main culprit for such unequal distribution of wealth. IN this respect, the first goal of the book is to provide compelling evidence that the main driver of wealth inequality is the debt-based economic system, as well as to discuss relative importance of the drivers provided by the literature in mainstream economics.
If the debt and fixed-price contracts are important determinants of the wealth inequality problem, the right redistribution policies should be designed and implemented by the policymakers. THe second goal of the book is to discuss that income-based redistribution policies are not as effective as the so called asset-based redistribution. IN this respect, theory, implications and viability of the asset-based redistribution are discussed. IN addition the book aims at showing that the idea of risk-sharing, as one of the pillars of Islamic finance, is a form of asset-based redistribution and an effective way to cope with the inequality problem.
The book aims at quantitatively showing that implementing risk-sharing based redistribution policies can significantly reduce the level of wealth inequality in the medium to long term. A Large stock-flows consistent model shed light on how wealth inequality occurs in a debt-based economy and how risk-sharing based redistribution and other redistribution proposal play significant roles in mitigating the income and wealth inequalities. THe model is novel in many respects and first of its kind in the Islamic economics and finance literature.