Inequality and Aggregate Savings in the Neoclassical Growth Model
AbstractWithin the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporal elasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.
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Date of creation: Aug 2010
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Marginal propensity to consume; income distribution; growth; concave consumption funktion;
Other versions of this item:
- Foellmi, Reto, 2009. "Inequality and Aggregate Savings in the Neoclassical Growth Model," CEPR Discussion Papers 7569, C.E.P.R. Discussion Papers.
- Reto Foellmi, 2008. "Inequality and aggregate savings in the neoclassical growth model," IEW - Working Papers 395, Institute for Empirical Research in Economics - University of Zurich.
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- D30 - Microeconomics - - Distribution - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-DEV-2010-10-16 (Development)
- NEP-DGE-2010-10-16 (Dynamic General Equilibrium)
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