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Inequality and Aggregate Savings in the Neoclassical Growth Model

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  • Reto Foellmi

Abstract

Within the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporal elasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.

Suggested Citation

  • Reto Foellmi, 2010. "Inequality and Aggregate Savings in the Neoclassical Growth Model," Diskussionsschriften dp1011, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1011
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    References listed on IDEAS

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    Cited by:

    1. Michael ?llinger & Friedrich L. Sell, 2019. "European Economies in Light of the Keynesian cum Kaldorian Macroeconomic Distribution Theory: A Theoretical and Empirical Investigation," Review of Economics & Finance, Better Advances Press, Canada, vol. 16, pages 59-75, May.
    2. Kazuo MIno & Yasuhiro Nakamoto, 2014. "Conformism and Wealth Distribution," KIER Working Papers 901, Kyoto University, Institute of Economic Research.

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    More about this item

    Keywords

    Marginal propensity to consume; income distribution; growth; concave consumption funktion;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • D30 - Microeconomics - - Distribution - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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