A model of trickle-down through learning
AbstractThis paper presents an analysis of income distribution based on an overlapping generations model of imperfect capital markets, technological non-convexities and information acquisition. Heterogeneous, altruistic agents apply for loans from financial intermediaries to undertake risky investment projects. Borrowing is prohibited below a critical level of wealth that depends on agents' evaluation of risk which is updated over time according to the arrival of new information. This process of learning governs the transition of lineage wealth and, with it, the dynamics of income distribution. In general, limiting outcomes depend on initial conditions that determine the extent to which class divisions persist in multiple steady state equilibria. Such divisions may vanish if the the initial distribution satisfies certain criteria.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 27 (2003)
Issue (Month): 3 (January)
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Other versions of this item:
- K Blackburn & N Bose, 2001. "A Model of Trickle Down Through Learning," Centre for Growth and Business Cycle Research Discussion Paper Series 06, Economics, The Univeristy of Manchester.
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