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A calibrated model of saving and income distribution for the UK

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  • Dr Martin Weale

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Abstract

We construct a general equilibrium model of a panel of 5000 agents in overlapping population cohorts, with a view to assessing its ability to represent both the macroeconomic and distributional characteristics of the economy; we take account of the income uncertainty which people face and calibrate it to represent the key characteristics of the economy. We find that, in a situation in which saving is motivated by life-cycle, precautionary and bequest motives a reasonably good representation can be obtained of both the distribution of wealth and the intergenerational transmission of wealth in the United Kingdom, The model offers a means of studying the distributional impact of policy changes. It suggests that inclusion of the bequest motive is important if the distribution of wealth is to be modelled well.

Suggested Citation

  • Dr Martin Weale, 1997. "A calibrated model of saving and income distribution for the UK," National Institute of Economic and Social Research (NIESR) Discussion Papers 123, National Institute of Economic and Social Research.
  • Handle: RePEc:nsr:niesrd:214
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    1. Majumder, Amita & Chakravarty, Satya Ranjan, 1990. "Distribution of Personal Income: Development of a New Model and Its Application to U.S. Income Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(2), pages 189-196, April-Jun.
    2. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
    3. McDonald, James B & Mantrala, Anand, 1995. "The Distribution of Personal Income: Revisited," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 201-204, April-Jun.
    4. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-445, March.
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