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Quantitative Models of Wealth Inequality: A Survey

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  • Mariacristina De Nardi

Abstract

While in the data wealth is concentrated in the hands of a small number of rich people and the saving rate of the rich is high, many models used for quantitative policy evaluation fail to match these facts. In addition, some of the models that succeed in matching these facts have radically different policy implications, depending on the nature and strength of the saving motives assumed. This paper surveys the savings mechanisms proposed so far (preference heterogeneity, transmission of bequests and human capital across generations, entrepreneurship, and high earnings risk for the top earners) and argues that more work is needed to understand wealth inequality and the saving motives behind it, and to evaluate policy more reliably.

Suggested Citation

  • Mariacristina De Nardi, 2015. "Quantitative Models of Wealth Inequality: A Survey," NBER Working Papers 21106, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21106
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    Cited by:

    1. Bettina Brueggemann, 2016. "Higher Taxes at the Top: The Role of Entrepreneurs," 2016 Meeting Papers 332, Society for Economic Dynamics.
    2. Krueger, D. & Mitman, K. & Perri, F., 2016. "Macroeconomics and Household Heterogeneity," Handbook of Macroeconomics, Elsevier.
    3. Konstantinos Angelopoulos & Spyridon Lazarakis & James Malley, 2017. "Wealth inequality and externalities from ex ante skill heterogeneity," Working Papers 2017_07, Business School - Economics, University of Glasgow.
    4. Rozsypal, Filip & Schlafmann, Kathrin, 2017. "Overpersistence Bias in Individual Income Expectations and its Aggregate Implications," CEPR Discussion Papers 12028, C.E.P.R. Discussion Papers.
    5. repec:eee:dyncon:v:90:y:2018:i:c:p:45-75 is not listed on IDEAS
    6. Sagiri Kitao & Lars Ljungqvist & Thomas Sargent, 2017. "A Life-Cycle Model of Trans-Atlantic Employment Experiences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 320-349, April.
    7. Wang, Chong & Wang, Neng & Yang, Jinqiang, 2016. "Optimal consumption and savings with stochastic income and recursive utility," Journal of Economic Theory, Elsevier, vol. 165(C), pages 292-331.
    8. Alloza, Mario, 2016. "The impact of taxes on income mobility," LSE Research Online Documents on Economics 86178, London School of Economics and Political Science, LSE Library.
    9. repec:eee:poleco:v:48:y:2017:i:c:p:104-127 is not listed on IDEAS
    10. Rishabh Kumar, 2015. "Savings from top incomes and accumulation in the United States context: Results from disaggregated national accounts," Working Papers 1524, New School for Social Research, Department of Economics.
    11. Scharrer, Christian & Heer, Burkhard, 2016. "The Burden of Unanticipated Fiscal Policy," Annual Conference 2016 (Augsburg): Demographic Change 145542, Verein für Socialpolitik / German Economic Association.
    12. Kaymak, Barış & Poschke, Markus, 2016. "The evolution of wealth inequality over half a century: The role of taxes, transfers and technology," Journal of Monetary Economics, Elsevier, vol. 77(C), pages 1-25.
    13. Zhao, Kai, 2017. "Social insurance, private health insurance and individual welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 78(C), pages 102-117.
    14. Dirk Krueger & Kurt Mitman & Fabrizio Perri, 2016. "On the Distribution of the Welfare Losses of Large Recessions," NBER Working Papers 22458, National Bureau of Economic Research, Inc.
    15. repec:mes:ijpoec:v:45:y:2016:i:3:p:224-240 is not listed on IDEAS
    16. Yum, Minchul, 2018. "On the distribution of wealth and employment," Working Papers 18-03, University of Mannheim, Department of Economics.
    17. repec:eee:jmacro:v:53:y:2017:i:c:p:162-175 is not listed on IDEAS
    18. Matthias Krapf, 2018. "The Joint Distribution of Wealth and Income Risk: Evidence from Bern," CESifo Working Paper Series 7130, CESifo Group Munich.
    19. Alessandro Bucciol & Laura Cavalli & Igor Fedotenkov & Paolo Pertile & Veronica Polin & Nicola Sartor & Alessandro Sommacal, 2015. "Public policies over the life cycle: a large scale OLG model for France, Italy and Sweden," Working Papers 29/2015, University of Verona, Department of Economics.
    20. Aaron Cooke & Hyun Lee & Kai Zhao, 2017. "Houses Divided: A Model of Intergenerational Transfers, Differential Fertility and Wealth Inequality," Working papers 2017-22, University of Connecticut, Department of Economics.
    21. Belanger, Gilles, 2016. "Inequality Causes Recessions: A Fallout from Ramsey's Conjecture," MPRA Paper 72335, University Library of Munich, Germany.
    22. Stefan Kranzinger, 2016. "Eine Analyse des Prozesses der Vermögensakkumulation anhand des Konzeptes der Pfadtheorie," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 42(1), pages 131-159.
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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