Big fortunes, aggregate saving and growth
AbstractThe paper analyzes a heterogeneous agents macro model in which large fortunes are created through entrepreneurial behavior. Special attention is given to the saving behavior of the very wealthy families. It is a prominent puzzle in consumption theory that the very rich save more than what one can explain by the standard permanent-income/life-cycle model. The paper follows the proposal of Christopher Carroll (1998) and modifies the utility function such that households may derive utility not just from consumption, but also from the ownership of capital directly. Carroll has shown that this modification is able to explain the saving behavior of the rich in a partial equilibrium setup. The present paper puts this idea into general equilibrium with a continuum of agents, and calibrates it to US data. It analyzes numerically under what conditions this model can explain the broad facts about wealth distribution, saving and interest rates. The paper also analyzes how savings and the interest rates react to low-frequency changes in productivity growth and capital tax rates, and compares it with the predictions of the standard model.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 263.
Date of creation: 11 Aug 2004
Date of revision:
wealth distribution; saving; heterogenous agents;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.