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The Stationery Distribution of Wealth with Random Shocks

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Abstract

A convergence model with wealth accumulation subject to i.i.d. random shocks is examined. The transfer function shows what k_{t+1} - wealth at t+1 - would be, given k_t, with no shock: It has a positive slope, but its concavity/convexity is indeterminate. The stationary distribution of wealth satisfies a Fredholm integral equation. This distribution can be examined by direct analysis of the wealth-accumulation stochastic process and via the Fredholm equation. The analysis resembles some econometric theory of time series. Economic theory forces consideration of a broad range of cases, including some which violate B-convergence. "Twin peaks" in the stationary distribution cannot be excluded.

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File URL: http://www.nuff.ox.ac.uk/economics/papers/2002/w6/StatDist.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2002-W6.

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Length: 31 pages
Date of creation: 01 Jan 2002
Date of revision:
Handle: RePEc:nuf:econwp:0206

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Web page: http://www.nuff.ox.ac.uk/economics/

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Keywords: Convergence; stochastic process; wealth distribution;

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  1. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1355, C.E.P.R. Discussion Papers.
  2. Sala-i-Martin, Xavier X, 1996. "The Classical Approach to Convergence Analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(437), pages 1019-36, July.
  3. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, American Economic Association, vol. 75(2), pages 332-37, May.
  4. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers, Centre for Economic Performance, LSE dp0280, Centre for Economic Performance, LSE.
  5. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 407-43, May.
  6. Joseph E. Stiglitz, 1967. "Distribution of Income and Wealth Among Individuals," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 238, Cowles Foundation for Research in Economics, Yale University.
  7. Binder, Michael & Pesaran, M Hashem, 1999. " Stochastic Growth Models and Their Econometric Implications," Journal of Economic Growth, Springer, Springer, vol. 4(2), pages 139-83, June.
  8. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 820, C.E.P.R. Discussion Papers.
  9. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, Elsevier, vol. 40(6), pages 1353-1375, June.
  10. Bliss, Christopher, 1999. "Galton's Fallacy and Economic Convergence," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 4-14, January.
  11. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(4), pages 2129-32, December.
  12. Steindl, Josef, 1972. "The Distribution of Wealth after a Model of Wold and Whittle," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 39(3), pages 263-79, July.
  13. Binder, M. & Pesaran, M.H., 1996. "Stochastic Growth," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9615, Faculty of Economics, University of Cambridge.
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