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Wealth and the Capitalist Spirit

  • Francis, Johanna L.

The wealth distribution in the U.S. is more unequal, or skewed to the right, than either the income or earnings distribution, a fact current models of saving behavior have difficulty explaining. Using Max Weber's (1905) idea that individuals may have a `capitalist spirit', I construct and simulate a model where some individuals accumulate wealth for its own sake rather than as deferred consumption. Including capitalist-spirit preferences in the standard life cycle model, with no other modifications, generates a skewness of wealth consistent with that observed in the U.S. economy. Furthermore, capitalist-spirit preferences provide a way to generate decreasing risk aversion with increases in wealth without resorting to idiosyncratic rates of time preference.

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File URL: http://mpra.ub.uni-muenchen.de/5985/1/MPRA_paper_5985.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5985.

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Date of creation: 15 Aug 2007
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Handle: RePEc:pra:mprapa:5985
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