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Wealth distribution and output fluctuations

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  • Ghiglino, Christian
  • Venditti, Alain

Abstract

We explore the link between wealth inequality and output fluctuations in a general two-sector neoclassical growth model with endogenous labor and heterogeneous agents. When agents have homogeneous CRRA preferences and individual wealth is Pareto distributed, a sufficiently large rise in the Gini index typically leads to an increase in endogenous fluctuations of output. For general economies, we show that under plausible conditions on the fundamentals, wealth inequality is still a destabilizing factor.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 146 (2011)
Issue (Month): 6 ()
Pages: 2478-2509

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Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2478-2509

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Wealth inequality; Pareto distribution; Gini index; Elastic labor supply; Endogenous equilibrium business cycles;

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