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Time Preference And The Distributions Of Wealth And Income

  • RICHARD M. H. SUEN

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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File URL: http://hdl.handle.net/10.1111/j.1465-7295.2012.00509.x
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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 52 (2014)
Issue (Month): 1 (01)
Pages: 364-381

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Handle: RePEc:bla:ecinqu:v:52:y:2014:i:1:p:364-381
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