Does Income Concentration Cause Bubbles?

Bubbles – the devastating kind – seem to occur during a period of time when income is becoming increasingly concentrated at the top.

That then raises a question. Do large bubbles cause income to become more concentrated, or does the concentration of income cause the bubbles?

We've had two bubbles since the distribution of income began changing in the 1970s, with the second verse worse than the first, and that leads me to think it might be that income concentration causes bubbles and not the other way around (it's possible that bubbles and income concentration aren't related at all - a third variable causes both or the relationship is spurious - but that seems unlikely to me).

It's interesting to note that the first bubble - the dot.com bubble in stocks in that popped in 2000 - occurred when the concentration of income (including capital gains) hit a level very similar to the concentration of income in 1929, particularly for the top .01%. The concentration of income accelerates from 1995-2000 in both diagrams as the dot.com the bubble is inflating, and a similar concentration of income is evident as the housing bubble is inflating:

Top 10% (source: Piketty and Saez)


Top 0.01% (source: Piketty and Saez)

So what causes what?