Finance and the Preservation of Wealth
AbstractWe introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (GSV, 2014) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the ratio of financial income to GDP increases with the ratio of aggregate wealth to GDP. Both rise along the convergence path to steady state growth. We examine several further implications of the model for management fees, unit costs of finance, and the consequences of shocks to trust and to the capital stock.
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Bibliographic InfoPaper provided by Harvard University OpenScholar in its series Working Paper with number 81051.
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Other versions of this item:
- Nicola Gennaioli & Andrei Shleifer & Robert W. Vishny, 2013. "Finance and the Preservation of Wealth," NBER Working Papers 19117, National Bureau of Economic Research, Inc.
- Gennaioli, Nicola & Shleifer, Andrei & Vishny, Robert, 2014. "Finance and the Preservation of Wealth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9890, C.E.P.R. Discussion Papers.
- E00 - Macroeconomics and Monetary Economics - - General - - - General
- G00 - Financial Economics - - General - - - General
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CIRANO Working Papers, CIRANO
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