• agent-based model
• computational economics
• credit rationing
• economics
• fiscal multiplier
• fiscal policy
• inequality
• macroeconomics
• redistribution

After reviewing the main empirical and theoretical findings about the evolution of inequality and its impact on macroeconomic dynamics, this thesis expands the analysis performed with an agent-based model by Napoletano, Roventini and Gaffard (2016). In the model, which is characterized by heterogeneous households with credit constraints, an inequality shock is introduced. This generates a fall in aggregate demand and income. Scenarios with different degrees of inequality are compared, and what emerges is that higher inequality is associated with more severe recessions. Moreover, a redistributive fiscal policy, in the form of a subsidy, is introduced after the crisis. This policy significantly dampens the fall in aggregate output implied by the inequality shock and is more effective than direct government expenditure in stimulating the economy.