Inequality and Debt in a Model with Heterogeneous Agents
AbstractWe propose a DSGE model with income heterogeneity to help discriminate across competing explanations of the cross-sectional divergence in debt-to-income ratios in US data. We show that for a DSGE model to be consistent with the data, the divergence in income growth should not be anticipated and should happen in an economy with low cost of access to financial intermediation. Differential productivity growth across the top and bottom-income quantile of the population has a much smaller impact on debt accumulation by the bottom income-quantile relative to a cross-sectional tax reallocation.
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Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 1408.
Date of creation: 2014
Date of revision:
Inequality; Debt; DSGE model;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-22 (All new papers)
- NEP-DGE-2014-03-22 (Dynamic General Equilibrium)
- NEP-MAC-2014-03-22 (Macroeconomics)
- NEP-PBE-2014-03-22 (Public Economics)
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