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The Rich and the Poor in a Simple Model of Growth and Distribution

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  • Kirill Borissov

Abstract

We consider a model of economic growth with altruistic consumers who care both about their consumption relative to others and the disposable income of their offsprings. We show that if the parameter accounting for the importance of positional concerns is lower than a certain threshold, then the wealth of all agents converges irrespective of the initial distribution of wealth. If, however, it is higher than the threshold, then all the capital is eventually owned by the households which were the richest from the outset.

Suggested Citation

  • Kirill Borissov, 2013. "The Rich and the Poor in a Simple Model of Growth and Distribution," EUSP Department of Economics Working Paper Series Ec-06/13, European University at St. Petersburg, Department of Economics.
  • Handle: RePEc:eus:wpaper:ec0613
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    References listed on IDEAS

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    1. Stéphane Lambrecht & Philippe Michel & Emmanuel Thibault, 2006. "Capital Accumulation and Fiscal Policy in an OLG Model with Family Altruism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(3), pages 465-486, August.
    2. Fisher, Walter H. & Heijdra, Ben J., 2009. "Keeping up with the ageing Joneses," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 53-64, January.
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    Cited by:

    1. Leonid V. Azarnert, 2017. "Migration, Congestion and Growth," CESifo Working Paper Series 6508, CESifo Group Munich.

    More about this item

    Keywords

    Growth; Inequality; Relative Consumption;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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