Age, Luck, and Inheritance

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Age, Luck, and Inheritance

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Jess Benhabib
Shenghao Zhu

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Jess Benhabib

Abstract

We present a mechanism to analytically generate a double Pareto distribution of wealth in a continuous time OLG model with optimizing agents who have bequest motives, are subject to stochastic returns on capital and have uncertain lifespans. We disentangle, roughly, the contribution of inheritance, age and stochastic rates of capital return to wealth inequality, in particular to the Gini coefficient. We investigate the role of the fiscal and redistributive policies for wealth inequality and social welfare.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14128.

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Date of creation: Jun 2008
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Handle: RePEc:nbr:nberwo:14128

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-07-05 (All new papers)
NEP-DGE-2008-07-05 (Dynamic General Equilibrium)
NEP-HAP-2008-07-05 (Economics of Happiness)
NEP-MAC-2008-07-05 (Macroeconomics)

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