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Age, Luck, and Inheritance

  • Jess Benhabib
  • Shenghao Zhu

We present a mechanism to analytically generate a double Pareto distribution of wealth in a continuous time OLG model with optimizing agents who have bequest motives, are subject to stochastic returns on capital and have uncertain lifespans. We disentangle, roughly, the contribution of inheritance, age and stochastic rates of capital return to wealth inequality, in particular to the Gini coefficient. We investigate the role of the fiscal and redistributive policies for wealth inequality and social welfare.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14128.

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Date of creation: Jun 2008
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Handle: RePEc:nbr:nberwo:14128
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