Capital Market Risk and the Dynamics of the Income Distribution
AbstractThis paper introduces a dynamic model of the wealth distribution with aggregate risk in the capital market; the model combines credit rationing and portfolio selection decisions. In a closed economy the long-run behaviour of wealth is independent of the initial income distribution when there is aggregate uncertainty, although further restrictions are necessary when there is no aggregate uncertainty. There can be credit rationing at the long-run equilibrium. In poor economies aggregate risk in the capital market slows growth, whereas in richer economies a risky capital market is good for income growth.
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Bibliographic InfoPaper provided by Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick in its series CSGR Working papers series with number 33/99.
Date of creation: May 1999
Date of revision:
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Postal: Centre for the Study of Globalisation and Regionalisation (CSGR) University of Warwick Coventry CV4 7AL, U.K.
Phone: +44 (0) 1203 572 533
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Web page: http://www.warwick.ac.uk/fac/soc/CSGR/
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Wealth Distribution; Dynamics; Uncertainty.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-07-28 (All new papers)
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