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Structural change and inequality in general equilibrium

Author

Listed:
  • Krzysztof Makarski

    (Group for Research in Applied Economics (GRAPE)
    Warsaw School of Economics)

  • Joanna Tyrowicz

    (Group for Research in Applied Economics (GRAPE)
    University of Warsaw
    Institute of Labor Economics (IZA))

  • Jan Lutynski

    (Group for Research in Applied Economics (GRAPE))

Abstract

We study the evolution of wealth inequality in an economy undergoing structural change. Economic intuition hints that structural change should imply increased income inequality, at least transiently. Economic intuition is more ambiguous for the effects on wealth inequality. On the one hand, increased dispersion in incomes implies increased dispersion in the ability to accumulate wealth across individuals. On the other hand, workers experience greater uncertainty, which may push them to more precautionary savings, which works towards equalizing wealth distribution. The net effect of these two opposing forces is essentially an empirical question. We build an overlapping generations model which features heterogeneous sectors and workers. Using this model, we quantify the role of demographics and the structural change in the evolution of wealth inequality in Poland as of 1990.

Suggested Citation

  • Krzysztof Makarski & Joanna Tyrowicz & Jan Lutynski, 2022. "Structural change and inequality in general equilibrium," GRAPE Working Papers 67, GRAPE Group for Research in Applied Economics.
    • Handle: RePEc:fme:wpaper:67
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    File URL: http://grape.org.pl/WP/67_MakarskiTyrowiczLutynski_website.pdf
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    More about this item

    Keywords

    structural change; demographic change; inequality;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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