Wealth inequality and dynamic stability
نویسنده
چکیده
In this paper we explore the link between wealth inequality and stability in a two-sector neoclassical growth model with heterogeneous agents. The stability of the steady state depends on the various parameters of the model and in particular on individual preferences. We show that when consumers have identical preferences and the inverse of absolute risk aversion (or risk tolerance) is a strictly convex function, inequality is a factor that favors instability. In the opposite case, inequality favors stability. Our characterization also shows that whenever absolute risk tolerance is linear, as when preferences exhibit hyperbolic absolute risk aversion (HARA), wealth heterogeneity is neutral. As there is not yet evidence on the concavity of absolute risk tolerance, our results unfortunately do not lead to a unique conclusion on the sign of the effect of wealth inequality on stability.
منابع مشابه
Long-'term Trends in American Wealth Inequality
Seventeenth and eighteenth century America saw relatively egalitarian and stable aggregate wealth concentration. During the first half of the nineteenth century, in contrast, there was a marked rise in wealth concentration. The period from the Civil War to the Great Depression was also one of stability in wealth concentration, but it was characterized by substantially greater inequality than ha...
متن کاملHyers-Ulam Stability of Non-Linear Volterra Integro-Delay Dynamic System with Fractional Integrable Impulses on Time Scales
This manuscript presents Hyers-Ulam stability and Hyers--Ulam--Rassias stability results of non-linear Volterra integro--delay dynamic system on time scales with fractional integrable impulses. Picard fixed point theorem is used for obtaining existence and uniqueness of solutions. By means of abstract Gr"{o}nwall lemma, Gr"{o}nwall's inequality on time scales, we establish Hyers-Ulam stabi...
متن کاملEndogenous groups and dynamic selection in mechanism design
We create a dynamic theory of endogenous risk sharing groups, with good internal information, and their coexistence with relative performance, individualistic regimes, which are informationally more opaque. Inequality and organizational form are determined simultaneously. Numerical techniques and succinct re-formulations of mechanism design problems with suitable choice of promised utilities al...
متن کاملAsset-Exchange Model and wealth distribution
The scientific study of economic inequality has drawn a major interest due to the ever growing uneven distribution of wealth within the whole society. According to Oxfam International, in 2010, 388 individuals holds as much wealth as half of the world population. And this number has, in 2016, decreased to 62 individuals (Hardoon and Ayele, 2016). It is a very important but extremely hard proble...
متن کاملSimulating the Transmission of Wealth Inequality via Bequests
This paper develops, calibrates, and simulates a dynamic 88-period OLG model to study the intergenerational transmission of U.S. wealth inequality via bequests. The model features marriage, realistic fertility patterns, random death, assortative mating based on skills, heterogeneous skill endowments, heterogeneous rates of return, skill inheritability, progressive income taxation, and resource ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید
ثبت ناماگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید
ورودعنوان ژورنال:
- J. Economic Theory
دوره 124 شماره
صفحات -
تاریخ انتشار 2005