IDEAS home Printed from
   My bibliography  Save this paper

Big fortunes, aggregate saving and growth


  • Michael Reiter


The paper analyzes a heterogeneous agents macro model in which large fortunes are created through entrepreneurial behavior. Special attention is given to the saving behavior of the very wealthy families. It is a prominent puzzle in consumption theory that the very rich save more than what one can explain by the standard permanent-income/life-cycle model. The paper follows the proposal of Christopher Carroll (1998) and modifies the utility function such that households may derive utility not just from consumption, but also from the ownership of capital directly. Carroll has shown that this modification is able to explain the saving behavior of the rich in a partial equilibrium setup. The present paper puts this idea into general equilibrium with a continuum of agents, and calibrates it to US data. It analyzes numerically under what conditions this model can explain the broad facts about wealth distribution, saving and interest rates. The paper also analyzes how savings and the interest rates react to low-frequency changes in productivity growth and capital tax rates, and compares it with the predictions of the standard model.

Suggested Citation

  • Michael Reiter, 2004. "Big fortunes, aggregate saving and growth," Computing in Economics and Finance 2004 263, Society for Computational Economics.
  • Handle: RePEc:sce:scecf4:263

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below 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.

    More about this item


    wealth distribution; saving; heterogenous agents;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf4:263. 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: (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.