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Wealth and the Capitalist Spirit

  • Johanna Francis

    (Fordham University, Department of Economics)

The wealth distribution in the U.S. is more unequal than either the income or earnings distribution, a fact current models of saving behavior have difficulty explaining. Using MaxWeber's (1905) idea that individuals may have a 'capitalist spirit', I construct and simulate a model where individuals accumulate wealth for its own sake rather than as deferred consumption. Including capitalist-spirit preferences in a simple life cycle model, with no other modifications, generates a skewness of wealth consistent with that observed in the U.S. economy. Furthermore, capitalist-spirit preferences provide a way to generate decreasing risk aversion with increases in wealth without resorting to idiosyncratic rates of time preference.

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File URL: http://legacy.fordham.edu/images/academics/graduate_schools/gsas/economics/dp2008_10_francis.pdf
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Paper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2008-10.

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Date of creation: 2008
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Handle: RePEc:frd:wpaper:dp2008-10
Contact details of provider: Web page: http://www.fordham.edu/economics/
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