Accumulation and the Extent of Inequality
This paper considers an economy where inequality originates from exogenous `talent' or `market luck' shocks and is transmitted over time by the same saving decisions that determine the aggregate rate of accumulation. The resulting interactions between factor- and personal-income distribution are studied in the light of existing analytic results from the precautionary-savings literature, and by numerical solution experiments. Aggregate savings are an increasing function of non-accumulated income variability, as individuals try to self-insure by accumulating wealth. In dynamic general equilibrium, however, non-accumulated income flows (`wages') depend endogenously on aggregate wealth accumulation. The level and/or the anticipated growth rate of wages affect microeconomic saving decisions so as to induce remarkable stability of long-run accumulated wealth distributions across parameter sets.
|Date of creation:||May 1995|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1187. 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: ()
If references are entirely missing, you can add them using this form.