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Transitional dynamics and the distribution of assets

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Author Info
Francesc Obiols-Homs ()
Carlos Urrutia ()

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Abstract

We study the evolution of the distribution of assets in a discrete time, deterministic growth model with log-utility, a minimum consumption requirement, Cobb-Douglas technology, and agents differing in initial assets. We prove that the coefficient of variation in assets across agents decreases monotonically in a transition to the steady state from below, if (i) the consumption requirement is zero, or (ii) the consumption requirement is not too big and the initial capital stock is large enough. We also show how a positive consumption requirement or a small elasticity of substitution between capital and labor can generate non-monotonic paths for inequality. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s00199-003-0447-3
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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 25 (2005)
Issue (Month): 2 (02)
Pages: 381-400
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Handle: RePEc:spr:joecth:v:25:y:2005:i:2:p:381-400

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Related research
Keywords: Wealth dynamics; Heterogeneous agents; Neoclassical growth model.;

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References listed on IDEAS
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  1. Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December. [Downloadable!] (restricted)
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  2. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July. [Downloadable!] (restricted)
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  3. Francesco Caselli & Jaume Ventura, 2000. "A Representative Consumer Theory of Distribution," American Economic Review, American Economic Association, vol. 90(4), pages 909-926, September. [Downloadable!] (restricted)
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  4. Chatterjee, Satyajit & Ravikumar, B., 1999. "Minimum Consumption Requirements: Theoretical And Quantitative Implications For Growth And Distribution," Macroeconomic Dynamics, Cambridge University Press, vol. 3(04), pages 482-505, December. [Downloadable!]
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  5. repec:cup:macdyn:v:3:y:1999:i:4:p:482-505 is not listed on IDEAS
  6. Hernandez D, Alejandro, 1991. "The dynamics of competitive equilibrium allocations with borrowing constraints," Journal of Economic Theory, Elsevier, vol. 55(1), pages 180-191, October. [Downloadable!] (restricted)
  7. Huggett, Mark & Ventura, Gustavo, 2000. "Understanding why high income households save more than low income households," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 361-397, April. [Downloadable!] (restricted)
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  8. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969. [Downloadable!] (restricted)
  9. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May. [Downloadable!] (restricted)
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Cited by:
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  1. Yoshiyasu Ono & Akihisa Shibata, 2006. "Capital Income Taxation and Specialization Patterns: Investment Tax vs. Saving Tax," KIER Working Papers 613, Kyoto University, Institute of Economic Research. [Downloadable!]
    Other versions:
  2. Luis San Vicente Portes, 2005. "On the Distributional Effects of Trade Policy: A Macroeconomic Perspective," Computing in Economics and Finance 2005 358, Society for Computational Economics. [Downloadable!]
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