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Wealth and the capitalist spirit

  • Francis, Johanna L.

The wealth distribution in the U.S. is more unequal than either the income or earnings distribution, a fact current models of saving behavior have difficulty explaining. Using Max Weber's [Weber, M. (1905). The Protestant Ethic and the Spirit of Capitalism. Charles Scribners' and Sons (1958 translated edition)] idea that individuals may have a 'capitalist spirit', I construct and simulate a model where individuals accumulate wealth for its own sake rather than as deferred consumption. Including capitalist spirit preferences in a simple life cycle model, with no other modifications, generates a skewness of wealth consistent with that observed in the U.S. economy. Furthermore, capitalist spirit preferences provide a way to generate decreasing risk aversion with increases in wealth without resorting to idiosyncratic rates of time preference.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 3 (September)
Pages: 394-408

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Handle: RePEc:eee:jmacro:v:31:y:2009:i:3:p:394-408
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