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Wealth and the capitalist spirit

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  • Francis, Johanna L.

Abstract

The wealth distribution in the U.S. is more unequal than either the income or earnings distribution, a fact current models of saving behavior have difficulty explaining. Using Max Weber's [Weber, M. (1905). The Protestant Ethic and the Spirit of Capitalism. Charles Scribners' and Sons (1958 translated edition)] idea that individuals may have a 'capitalist spirit', I construct and simulate a model where individuals accumulate wealth for its own sake rather than as deferred consumption. Including capitalist spirit preferences in a simple life cycle model, with no other modifications, generates a skewness of wealth consistent with that observed in the U.S. economy. Furthermore, capitalist spirit preferences provide a way to generate decreasing risk aversion with increases in wealth without resorting to idiosyncratic rates of time preference.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 3 (September)
Pages: 394-408

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Handle: RePEc:eee:jmacro:v:31:y:2009:i:3:p:394-408

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Capitalist spirit Life cycle Wealth inequality;

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Cited by:
  1. repec:cuf:journl:y:2013:v:14:i:1:n:3:huang is not listed on IDEAS
  2. Lilia Karnizova, 2008. "The Spirit of Capitalism and Expectation Driven Business Cycles," Working Papers 0804E, University of Ottawa, Department of Economics.
  3. Tokuoka, Kiichi, 2012. "Is wealth accumulation a luxury good?," Economics Letters, Elsevier, vol. 115(3), pages 523-526.
  4. Davoine, Thomas, 2012. "Time constraints, saving and old age," Economics Working Paper Series 1221, University of St. Gallen, School of Economics and Political Science.
  5. Michael Kumhof & Romain Ranciere & Pablo Winant, 2013. "Inequality, Leverage and Crises: The Case of Endogenous Default," IMF Working Papers 13/249, International Monetary Fund.
  6. Jizheng Huang & Heng-fu Zou, 2013. "Asset Pricing, Capital Structure and the Spirit of Capitalism in a Production Economy," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 367-384, November.
  7. Wojciech Kopczuk, 2012. "Taxation of Intergenerational Transfers and Wealth," NBER Working Papers 18584, National Bureau of Economic Research, Inc.
  8. Jizheng Huang & Heng-fu Zou, 2011. "Asset pricing and the Modigliani-Miller theorem with the spirit of capitalism," CEMA Working Papers 456, China Economics and Management Academy, Central University of Finance and Economics.
  9. Thomas Goda, 2014. "Global trends in relative and absolute wealth concentrations," DOCUMENTOS DE TRABAJO CIEF 010897, UNIVERSIDAD EAFIT.

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