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The spenders-hoarders theory of capital accumulation, wealth distribution and fiscal policy


  • PESTIEAU, Pierre

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • THIBAULT, Emmanuel


This paper proposes a simple OLG model which is consistent with the essential facts about consumer behavior, capital accumulation and wealth distribution, and yields some new and surprising conclusions about fiscal policy. By considering a society in which individuals are distinguished according to two characteristics, altruism and wealth preference, we show that those who in the long run hold the bulk of private capital are not so much motivated by dynastic altruism as by preference for wealth. Two types of social segmentation can result with different wealth distribution. To a large extent our results seem to fit reality better than those obtained with standard optimal growth models in which dynastic altruism (or rate of impatience) is the only source of heterogeneity: overaccumulation can appear, public debt and unfunded pensions are not neutral, estate taxation can improve the welfare of the top wealthy.

Suggested Citation

  • PESTIEAU, Pierre & THIBAULT, Emmanuel, 2007. "The spenders-hoarders theory of capital accumulation, wealth distribution and fiscal policy," CORE Discussion Papers 2007040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2007040

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    References listed on IDEAS

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    Cited by:

    1. Pierre Pestieau & Emmanuel Thibault, 2012. "Love thy children or money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(1), pages 31-57, May.

    More about this item


    altruism; preference for wealth; capital accumulation; wealth distribution; Ricardian equivalence;

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt


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