Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies
Weexplore the link between wealth inequality, preference heterogeneity and macroeconomicvolatility in a two-sector neoclassical growth model. First we prove that, if agents havehomogeneous preferences, when the absolute risk tolerance is a strictly convex (concave) function, sufficiently high (low) levels of wealthinequalitymay lead to endogenous fluctuations in the neighborhood of the steady state. Second, we consider the effects of preference heterogeneity whenagents are homogeneous with respect to their wealth. We show that when the utility functionbelongs to the HARA class, sufficiently high levels of preference heterogeneitymay lead to endogenous fluctuations in the neighborhood of the steady state if theelasticity of intertemporal substitution in consumption is greater than one.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nishimura, Kazuo, 1985.
"Competitive equilibrium cycles,"
Journal of Economic Theory,
Elsevier, vol. 35(2), pages 284-306, August.
- Becker, Robert A. & Tsyganov, Eugene N., 2002. "Ramsey Equilibrium in a Two-Sector Model with Heterogeneous Households," Journal of Economic Theory, Elsevier, vol. 105(1), pages 188-225, July.
- Frank Cowell, 1998.
"Measurement of inequality,"
LSE Research Online Documents on Economics
2084, London School of Economics and Political Science, LSE Library.
- Michele Boldrin & Aldo Rustichini, 2010.
"Growth and Indeterminacy in Dynamic Models with Externalities,"
Levine's Working Paper Archive
1382, David K. Levine.
- Boldrin, Michele & Rustichini, Aldo, 1994. "Growth and Indeterminacy in Dynamic Models with Externalities," Econometrica, Econometric Society, vol. 62(2), pages 323-342, March.
- Carroll, Christopher D & Kimball, Miles S, 1996.
"On the Concavity of the Consumption Function,"
Econometric Society, vol. 64(4), pages 981-992, July.
- Christopher D. Carroll & Miles S. Kimball, 1995. "On the concavity of the consumption function," Finance and Economics Discussion Series 95-10, Board of Governors of the Federal Reserve System (U.S.).
- Christopher D. Carroll & Miles S. Kimball, 1995. "On the Concavity of the Consumption Function," Macroeconomics 9503003, EconWPA.
- Benhabib, Jess & Nishimura, Kazuo, 1981. "Stability of Equilibrium in Dynamic Models of Capital Theory," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 275-293, June.
- Christian Ghiglino & Marielle Olszak-Duquenne, 2004.
"On the Impact of Heterogeneity on Indeterminacy,"
Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva
2004.09, Institut d'Economie et Econométrie, Université de Genève.
- Nishimura, Kazuo & Yano, Makoto, 1996. "On the Least Upper Bound of Discount Factors That Are Compatible with Optimal Period-Three Cycles," Journal of Economic Theory, Elsevier, vol. 69(2), pages 306-333, May.
- Timothy J. Kehoe & David K. Levine & Paul Romer, 1990.
"Determinacy of Equilibrium in Dynamic Models with Finitely Many Consumers,"
Levine's Working Paper Archive
165, David K. Levine.
- Kehoe, Timothy J. & Levine, David K. & Romer, Paul M., 1990. "Determinacy of equilibria in dynamic models with finitely many consumers," Journal of Economic Theory, Elsevier, vol. 50(1), pages 1-21, February.
- Timothy J. Kehoe & David K. Levine & Paul M. Romer, 1989. "Determinacy of equilibria in dynamic models with finitely many consumers," Staff Report 118, Federal Reserve Bank of Minneapolis.
- Santos, Manuel S., 1992. "Differentiability and comparative analysis in discrete-time infinite-horizon optimization," Journal of Economic Theory, Elsevier, vol. 57(1), pages 222-229.
- Mitra, Tapan, 1996. "An Exact Discount Factor Restriction for Period-Three Cycles in Dynamic Optimization Models," Journal of Economic Theory, Elsevier, vol. 69(2), pages 281-305, May.
- Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
- Gollier, C., 1997.
"Wealth Inequality and Asset Pricing,"
97.486, Toulouse - GREMAQ.
- Tapan Mitra & Gerhard Sorger, 1999. "Rationalizing Policy Functions by Dynamic Optimization," Econometrica, Econometric Society, vol. 67(2), pages 375-392, March.
- Ghiglino, Christian, 2005.
"Wealth inequality and dynamic stability,"
Journal of Economic Theory,
Elsevier, vol. 124(1), pages 106-115, September.
- Christian Ghiglino & Marielle Olszak-Duquenne, 2001. "Inequalities and fluctuations in a dynamic general equilibrium model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 17(1), pages 1-24.
- Berthold Herrendorf & Akos Valentinyi & Robert Waldmann, 2000. "Ruling Out Multiplicity and Indeterminacy: The Role of Heterogeneity," Review of Economic Studies, Oxford University Press, vol. 67(2), pages 295-307.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- Mitra, Tapan & Nishimura, Kazuo, 2001. "Discounting and Long-Run Behavior: Global Bifurcation Analysis of a Family of Dynamical Systems," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 256-293, January.
- Sorger, Gerhard, 1992. "On the minimum rate of impatience for complicated optimal growth paths," Journal of Economic Theory, Elsevier, vol. 56(1), pages 160-179, February.
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:135:y:2007:i:1:p:414-441. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.