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Time Preference and the Distributions of Wealth and Income

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  • Richard M. H. Suen

    ()
    (Department of Economics, University of California Riverside)

Abstract

This paper presents a dynamic competitive equilibrium model with heterogeneous time pref- erences that can account for the observed patterns of wealth and income inequality in the United States. This model generalizes the standard neoclassical growth model by including (i) a demand for status by the consumers and (ii) human capital formation. The Örst feature prevents the wealth distribution from collapsing into a degenerate distribution. The second feature generates a strong positive correlation between earnings and wealth across agents. A calibrated version of this model succeeds in replicating the wealth and income distributions of the United States.Length: 38 pages

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Bibliographic Info

Paper provided by University of California at Riverside, Department of Economics in its series Working Papers with number 201004.

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Date of creation: Feb 2010
Date of revision: Feb 2010
Handle: RePEc:ucr:wpaper:201004

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Keywords: Inequality; Heterogeneity; Time Preference; Human Capital;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Time Preference and the Distributions of Wealth and Income
    by Christian Zimmermann in NEP-DGE blog on 2010-03-14 14:55:32
  2. â??Complex Mainstream Model Derives Observed Result Using Obvious Assumptionsâ?
    by Nick Krafft in open economics on 2010-03-15 15:30:42

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