Wealth distribution and output fluctuations
AbstractWe 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 InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 146 (2011)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/inca/622869
Wealth inequality; Pareto distribution; Gini index; Elastic labor supply; Endogenous equilibrium business cycles;
Find related papers by JEL classification:
- D30 - Microeconomics - - Distribution - - - General
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D90 - Microeconomics - - Intertemporal Choice - - - General
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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