Ergodic Chaos and Aggregate Stability: A Deterministic Discrete-Choice Model of Wealth Distribution Dynamics
AbstractThis paper studies wealth distribution dynamics in a small open economy with a continuum of consumers indexed by initial wealth. Each of them solves a discrete-choice problem whose optimal policy function exhibits ergodic chaos. We show that for any initial distribu- tion of wealth given by a density, the wealth distribution converges to a unique invariant distribution, and aggregate wealth converges to the corresponding value. Thus ergodic chaos leads to aggregate stability rather than instability. These results are illustrated with various nu- merical examples.
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Bibliographic InfoPaper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2012-20.
Length: 17 pages
Date of creation: Jul 2012
Date of revision:
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Aggregation; Ergodic chaos; Stability; Discrete choice; Wealth distribution; Frobenius-Perron operator;
Other versions of this item:
- Takashi Kamihigashi, 2013. "Ergodic chaos and aggregate stability: A deterministic discrete-choice model of wealth distribution dynamics," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(1), pages 45-56, 03.
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
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