Capital Markets, Information Aggregation and Inequality: Theory and Experimental Evidence
In most industrialized economies, financial wealth is distributed far more unequally than income. According to Wolff (2007) more than half of the American households possess almost no productive capital while realizing about 20 percent of national income. This mismatch poses a problem for the efficient aggregation of consumer needs on capital markets. Individuals use information about their own preferences as consumers to identify profitable investments. Under certain conditions, this behaviour efficiently matches future demand with productive capacity, thus replacing future markets for consumer goods. However, when wealth is distributed too unequally, capacity cannot match consumer needs. I present some first experimental evidence in favour of consumption driven investment behaviour based on real portfolio choices and self-reported preferences about consumer goods.
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.
|Date of creation:||Mar 2008|
|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: |
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.:
- Peter Funk, 1995. "Endogenous Growth, Temporary Equilibrium, and the Direction of Change," Discussion Paper Serie A 506, University of Bonn, Germany.
- James B. Davies & Anthony Shorrocks & Edward N. Wolff, 2010.
"The World Distribution of Household Wealth,"
- Davies, James B. & Sandstrom, Susanna & Shorrocks, Anthony & Wolff, Edward N., 2008. "The World Distribution of Household Wealth," Working Paper Series DP2008/03, World Institute for Development Economic Research (UNU-WIDER).
- DAVIES, JAMES B & Shorrocks, Anthony & Sandstrom, Susanna & WOLFF, EDWARD N, 2007. "The World Distribution of Household Wealth," Center for Global, International and Regional Studies, Working Paper Series qt3jv048hx, Center for Global, International and Regional Studies, UC Santa Cruz.
- Galor, Oded & Zeira, Joseph, 1988.
"Income Distribution and Macroeconomics,"
51644, University Library of Munich, Germany, revised 01 Sep 1989.
- Joshua D. Coval & Tobias J. Moskowitz, 1999. "Home Bias at Home: Local Equity Preference in Domestic Portfolios," Journal of Finance, American Finance Association, vol. 54(6), pages 2045-2073, December.
- Abhijit V. Banerjee & Andrew F. Newman, 1990.
"Occupational Choice and the Process of Development,"
911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
- Funk, P., 1997.
"Satiation and Underdevelopment,"
DELTA Working Papers
97-24, DELTA (Ecole normale supérieure).
- Gruner, Hans Peter, 2003. "Redistribution as a selection device," Journal of Economic Theory, Elsevier, vol. 108(2), pages 194-216, February.
- HansPeter Grüner & Rüdiger Schils, 2007. "The political Economy of Wealth and Interest," Economic Journal, Royal Economic Society, vol. 117(523), pages 1403-1422, October.
- Funk,Peter, 1993. "The direction of technological change," Discussion Paper Serie A 393, University of Bonn, Germany.
- Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 173-189.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6750. 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.