US Inequality: Debt Constraints or Incomplete Asset Markets?
To examine the role of debt constraints and incomplete asset markets (lack of insurance markets) in explaining U.S. inequality, we run horse races between competing models. For a widely used model, we decompose inequality into its fundamental driving forces. The underlying source of inequality in all models is uninsurable idiosyncratic risk. Both debt constraints and incomplete asset markets are needed to account for inequality, but asset market incompleteness is the key friction. It better accounts for the concentration and dispersion of wealth, and is the most costly friction in terms of welfare. Tight debt constraints are important for explaining the lower tail of the wealth distribution.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||16 Nov 2010|
|Publication status:||Published in Journal of Monetary Economics, March 2008, vol. 55 no. 2, pp. 350-364|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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.:
- Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2008.
"The Macroeconomic Implications of Rising Wage Inequality in the United States,"
NBER Working Papers
14052, National Bureau of Economic Research, Inc.
- Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2010. "The Macroeconomic Implications of Rising Wage Inequality in the United States," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 681-722, 08.
- Jonathan Heathcote, 2003. "The Macroeconomic Implications of Rising Wage Inequality in the United States," Working Papers gueconwpa~03-03-19, Georgetown University, Department of Economics.
- David Domeij & Jonathan Heathcote, 2004. "On The Distributional Effects Of Reducing Capital Taxes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 523-554, 05.
- John Moore & Nobuhiro Kiyotaki, "undated".
1995-5, Edinburgh School of Economics, University of Edinburgh.
- Vincenzo Quadrini, 2000.
"Entrepreneurship, Saving and Social Mobility,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 1-40, January.
- Vincenzo Quadrini, 1997. "Entrepreneurship, saving and social mobility," Discussion Paper / Institute for Empirical Macroeconomics 116, Federal Reserve Bank of Minneapolis.
- Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
- Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
- Glenn B. Canner & Arthur B. Kennickell & Charles A. Luckett, 1995. "Household sector borrowing and the burden of debt," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 323-338.
- Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
- Córdoba, Juan Carlos & Verdier, Geneviève, 2008.
"Inequality and growth: Some welfare calculations,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 32(6), pages 1812-1829, June.
- John Heaton & Deborah Lucas, 1993.
"Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing,"
NBER Working Papers
4249, National Bureau of Economic Research, Inc.
- Heaton, John & Lucas, Deborah J, 1996. "Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 443-487, June.
- S. Rao Aiyagari, 1994.
"Uninsured Idiosyncratic Risk and Aggregate Saving,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 109(3), pages 659-684.
- Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x.
- Mariacristina De Nardi, 2002.
"Wealth inequality and intergenerational links,"
314, Federal Reserve Bank of Minneapolis.
- Mariacristina deNardi, 2000. "Wealth Inequality and Intergenerational Links," Econometric Society World Congress 2000 Contributed Papers 0547, Econometric Society.
- Kehoe, Timothy J & Levine, David K, 2001. "Liquidity Constrained Markets versus Debt Constrained Markets," Econometrica, Econometric Society, vol. 69(3), pages 575-598, May.
- Orazio Attanasio & Erich Battistin & Hidehiko Ichimura, 2004. "What Really Happened to Consumption Inequality in the US?," NBER Working Papers 10338, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:isu:genres:32120. 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: (Curtis Balmer)
If references are entirely missing, you can add them using this form.