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A comment on “wealth inequality and endogenous growth” by Byoungchan Lee

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  • Gu, Shijun
  • Jia, Chengcheng

Abstract

How does wealth inequality affect economic growth? Byoungchan Lee answers this question by developing a heterogeneous-agent model and augmenting it with endogenous firm innovation. The novel channel is that rising wealth concentration reduces aggregate demand, which gives firms a disincentive to spend on R&D and therefore leads to slower productivity growth. In this discussion, we first explain the difference in calibration strategy between Lee’s approach and the common approach in the literature, and then discuss its quantitative implications for the effect of rising inequality on aggregate consumption.

Suggested Citation

  • Gu, Shijun & Jia, Chengcheng, 2023. "A comment on “wealth inequality and endogenous growth” by Byoungchan Lee," Journal of Monetary Economics, Elsevier, vol. 133(C), pages 149-155.
    • Handle: RePEc:eee:moneco:v:133:y:2023:i:c:p:149-155
    DOI: 10.1016/j.jmoneco.2022.11.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Heterogeneous-agent model; Wealth inequality; Aggregate consumption;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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