IDEAS home Printed from
   My bibliography  Save this article

Risk-Bearing and the Theory of Income Distribution


  • Abhijit V. Banerjee
  • Andrew F. Newman


This paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality. Unlike previous work, our approach takes explicit account of the reason for market incompleteness in modeling agents' behaviour; in particular, the amount of risk borne is endogenous. Using a model of growth with altruism in which agents are risk-averse and there is moral hazard, we show that lineage wealth follows a Markov process which converges globally to an ergodic distribution; this also represents the long-run population distribution of wealth. We discuss the role of particular assumptions, such as availability of production loans and unboundedness of utility, in yielding the qualitative properties of the distribution of wealth, the choice of "occupation" and the prevention of poverty traps.

Suggested Citation

  • Abhijit V. Banerjee & Andrew F. Newman, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 211-235.
  • Handle: RePEc:oup:restud:v:58:y:1991:i:2:p:211-235.

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:58:y:1991:i:2:p:211-235.. 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: . General contact details of provider: .

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.