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Optimal Cycles and Social Inequality: What Do We Learn from the Gini Index?

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  • Stefano Bosi

    ()
    (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne)

  • Thomas Seegmuller

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

One of the plausible explanations for macroeconomic fluctuations relies on the occurrence of endogenous deterministic cycles. In the last three decades, most of the relevant literature has rested on the assumption of a representative agent but, recently, a few papers have investigated the role of consumers' heterogeneity on endogenous fluctuations. Our article aims at taking a step forward in order to give a more suitable interpretation. To keep things as simple as possible, we introduce heterogeneous households in a two-sector optimal growth model and we study how wealth heterogeneity affects the occurrence of endogenous cycles. In contrast to previous results, we relate the existence of such cycles to the most commonly used inequality measure, the Gini index, and analyze the impact of consumers' heterogeneity on this index.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00194182.

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Date of creation: Mar 2006
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Publication status: Published, Research in Economics, 2006, 60, 1, 35-46
Handle: RePEc:hal:cesptp:halshs-00194182

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Keywords: Endogenous cycles ; two-sector models ; heterogeneous agents ; Gini index;

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  1. Kehoe, Timothy J. & Levine, David K. & Romer, Paul M., 1990. "Determinacy of equilibria in dynamic models with finitely many consumers," Journal of Economic Theory, Elsevier, vol. 50(1), pages 1-21, February.
  2. Nishimura, Kazuo, 1985. "Competitive equilibrium cycles," Journal of Economic Theory, Elsevier, vol. 35(2), pages 284-306, August.
  3. Ghiglino, Christian, 2005. "Wealth inequality and dynamic stability," Journal of Economic Theory, Elsevier, vol. 124(1), pages 106-115, September.
  4. Herrendorf, Berthold & Valentinyi, Akos & Waldmann, Robert, 2000. "Ruling Out Multiplicity and Indeterminacy: The Role of Heterogeneity," Review of Economic Studies, Wiley Blackwell, vol. 67(2), pages 295-307, April.
  5. Christian Ghiglino & Marielle Olszak-Duquenne, 2001. "Inequalities and fluctuations in a dynamic general equilibrium model," Economic Theory, Springer, vol. 17(1), pages 1-24.
  6. Becker, Robert A. & Tsyganov, Eugene N., 2002. "Ramsey Equilibrium in a Two-Sector Model with Heterogeneous Households," Journal of Economic Theory, Elsevier, vol. 105(1), pages 188-225, July.
  7. Bosi, Stefano & Magris, Francesco & Venditti, Alain, 2005. "Competitive equilibrium cycles with endogenous labor," Journal of Mathematical Economics, Elsevier, vol. 41(3), pages 325-349, April.
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Cited by:
  1. Bosi, Stefano & Seegmuller, Thomas, 2008. "Can heterogeneous preferences stabilize endogenous fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 624-647, February.
  2. Christian Ghiglino & Alain Venditti, 2008. "The role of the wealth distribution on output volatility," Economics Discussion Papers 653, University of Essex, Department of Economics.
  3. Druckman, A. & Jackson, T., 2008. "Measuring resource inequalities: The concepts and methodology for an area-based Gini coefficient," Ecological Economics, Elsevier, vol. 65(2), pages 242-252, April.
  4. repec:hal:journl:halshs-00266713 is not listed on IDEAS

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