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The Stationary Distributions of Wealth with Random Shocks

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  • Christopher Bliss
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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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2002-W06.

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    Date of creation: 01 Jan 2002
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    Handle: RePEc:oxf:wpaper:2002-w06

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    Keywords: Convergence; stochastic process; wealth distribution;

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    1. Bliss, Christopher, 1999. "Galton's Fallacy and Economic Convergence," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 4-14, January.
    2. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
    3. Binder, M. & Pesaran, M.H., 1996. "Stochastic Growth," Cambridge Working Papers in Economics 9615, Faculty of Economics, University of Cambridge.
    4. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
    5. Bliss, Christopher, 2000. "Galton's Fallacy and Economic Convergence: A Reply to Cannon and Duck," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 420-22, April.
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