IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth

  • Jordi Caballé

    ()

    (Unitat de Fonaments de l’Anàlisi Economica and CODE, Universitat Autònoma de Barcelona.)

  • Ana I. Moro Egido

    ()

    (Department of Economic Theory and Economic History, University of Granada.)

In this paper, we analyze how the introduction of habits and aspirations affects the distribution of wealth when individuals’ labor productivity is subject to idiosyncratic shocks and bequests arise from a joy-of-giving motive. In the presence of either bequests or aspirations, labor income shocks are transmitted intergenerationally and this transmission, together with the contemporaneous income shocks, determines the stationary distribution of wealth. We show that the introduction of aspirations increases both the intragenerational variability of wealth and the corresponding degree of intergenerational mobility. The opposite result holds when habits are introduced. Finally, we discuss how aspirations and habits interact with the redistributive features of an unfunded social security system.

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.

File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers08_02.pdf
Download Restriction: no

Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 08/02.

as
in new window

Length: 28 pages
Date of creation: 09 Jun 2008
Date of revision:
Handle: RePEc:gra:wpaper:08/02
Contact details of provider: Postal: Campus Universitario de Cartuja
Phone: (34)958248346
Fax: (34)958249995
Web page: http://www.ugr.es/local/teoriahe
Email:


More information through EDIRC

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.:

as in new window
  1. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
  2. Abel, Andrew B, 1986. "Capital Accumulation and Uncertain Lifetimes with Adverse Selection," Econometrica, Econometric Society, vol. 54(5), pages 1079-97, September.
  3. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
  4. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-91, September.
  5. Mohamed Jellal & Francois-Charles Wolff, 2002. "Altruistic Bequests with Inherited Tastes," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 1(2), pages 95-113, August.
  6. Josep Pijoan-Mas 2 & Antonia Díaz & José-Víctor Ríos-Rull, 2001. "Habit Formation: Inplications For The Wealth Distribution," Economics Working Papers we015114, Universidad Carlos III, Departamento de Economía.
  7. Christian Kleiber & Martin Sexauer & Klaus Wälde, 2006. "Bequests, Taxation and the Distribution of Wealth in a General Equilibrium Model," CESifo Working Paper Series 1723, CESifo Group Munich.
  8. David DE LA CROIX & Philippe MICHEL, 2001. "Altruism and Self-Restraint," Annales d'Economie et de Statistique, ENSAE, issue 63-64, pages 233-259.
  9. Jordi Caballé & Luisa Fuster, 2003. "Pay-as-you-go Social Security and the Distribution of Altruistic Transfers," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 541-567.
  10. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Finance and Economics Discussion Series 95-42, Board of Governors of the Federal Reserve System (U.S.).
  11. Cass, David, 1972. "On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization," Journal of Economic Theory, Elsevier, vol. 4(2), pages 200-223, April.
  12. Jaime Alonso-Carrera & Jordi Caball?Author-Email: jordi.caballe@uab.es & Xavier Raurich, . "Growth, Habit Formation, and Catching-up\ with the Joneses," UFAE and IAE Working Papers 497.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  13. Andreas Waldkirch & Serena Ng & Donald Cox, 2004. "Intergenerational Linkages in Consumption Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
  14. Jaime Alonso-Carrera & Jordi Caballé & Xavier Raurich, 2007. "Aspirations, Habit Formation, and Bequest Motive," Economic Journal, Royal Economic Society, vol. 117(520), pages 813-836, 04.
  15. Jaime Alonso-Carrera & Jordi Caballe & Xavier Raurich, 2001. "Consumption Externalities, Habit Formation, and Equilibrium Efficiency," UFAE and IAE Working Papers 499.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  16. Croix, David de la & Michel, Philippe, 1999. "Optimal growth when tastes are inherited," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 519-537, February.
  17. Christopher D. Carroll & Jody Overland & David N. Weil, 1997. "Comparison Utility in a Growth Model," NBER Working Papers 6138, National Bureau of Economic Research, Inc.
  18. Andrew B. Abel, 1998. "Risk Premia and Term Premia in General Equilibrium," NBER Working Papers 6683, National Bureau of Economic Research, Inc.
  19. Jordi Caballé & Luisa Fuster, 2000. "Pay-as-you-go social security and the distribution of bequests," Economics Working Papers 468, Department of Economics and Business, Universitat Pompeu Fabra.
  20. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
  21. de la Croix, David, 1996. "Economic development and convergence clubs: the role of inherited tastes and human capital," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1996024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1996.
  22. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  23. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
  24. de la Croix, David, 1996. "The dynamics of bequeathed tastes," Economics Letters, Elsevier, vol. 53(1), pages 89-96, October.
  25. Davies, James B, 1986. "Does Redistribution Reduce Inequality?," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 538-59, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:gra:wpaper:08/02. 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: (Angel Solano Garcia.)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.