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A model of trickle-down through learning

Listed author(s):
  • Blackburn, Keith
  • Bose, Niloy

This paper presents an analysis of income distribution based on an overlapping generations model of imperfect capital markets, technological non-convexities and information acquisition. Heterogeneous, altruistic agents apply for loans from financial intermediaries to undertake risky investment projects. Borrowing is prohibited below a critical level of wealth that depends on agents' evaluation of risk which is updated over time according to the arrival of new information. This process of learning governs the transition of lineage wealth and, with it, the dynamics of income distribution. In general, limiting outcomes depend on initial conditions that determine the extent to which class divisions persist in multiple steady state equilibria. Such divisions may vanish if the the initial distribution satisfies certain criteria.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 27 (2003)
Issue (Month): 3 (January)
Pages: 445-466

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Handle: RePEc:eee:dyncon:v:27:y:2003:i:3:p:445-466
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-751, August.
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  8. Bénabou, Roland, 1993. "Heterogeneity, Stratification and Growth," CEPR Discussion Papers 815, C.E.P.R. Discussion Papers.
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  11. William W. Lang & Leonard I. Nakamura, 1989. "The dynamics of credit markets in a model with learning," Working Papers 89-23, Federal Reserve Bank of Philadelphia.
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  13. Atkinson, A-B, 1996. "Bringing Income Distribution in from the Cold," Economics Papers 117, Economics Group, Nuffield College, University of Oxford.
  14. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
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