On the Long-Run Distribution of Capital in the Ramsey Model

We study issues related to the long-run distribution of wealth in two variants of Ramsey’s model of optimal capital accumulation. First we show that, in the case where a government levies a progressive income tax, there exist infinitely many stationary equilibria in which all households own positive capital stocks. Moreover, it is demonstrated that non-stationary equilibria can exhibit complicated dynamics. Then we discuss the case where households exercise market power on the capital market and we show that this may also lead to equilibria in which all households own positive amounts of capital. Journal of Economic Literature Classification Numbers: E62, O41. © 2001 Elsevier Science (USA)