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Time Preference and the Distributions of Wealth and Income

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  • Richard M. H. Suen

    (Department of Economics, University of California Riverside)

Abstract

This paper presents a dynamic competitive equilibrium model with heterogeneous time pref- erences that can account for the observed patterns of wealth and income inequality in the United States. This model generalizes the standard neoclassical growth model by including (i) a demand for status by the consumers and (ii) human capital formation. The Örst feature prevents the wealth distribution from collapsing into a degenerate distribution. The second feature generates a strong positive correlation between earnings and wealth across agents. A calibrated version of this model succeeds in replicating the wealth and income distributions of the United States.Length: 38 pages

Suggested Citation

  • Richard M. H. Suen, 2010. "Time Preference and the Distributions of Wealth and Income," Working Papers 201004, University of California at Riverside, Department of Economics, revised Feb 2010.
    • Handle: RePEc:ucr:wpaper:201004
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Time Preference and the Distributions of Wealth and Income
      by Christian Zimmermann in NEP-DGE blog on 2010-03-14 19:55:32
    2. “Complex Mainstream Model Derives Observed Result Using Obvious Assumptions”
      by Nick Krafft in open economics on 2010-03-15 20:30:42

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    Cited by:

    1. Richard M. H. Suen, 2014. "Time Preference And The Distributions Of Wealth And Income," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 364-381, January.
    2. Andersen, Torben M. & Bhattacharya, Joydeep & Grodecka-Messi, Anna & Mann, Katja, 2022. "Pension reform and wealth inequality: evidence from Denmark," Working Paper Series 411, Sveriges Riksbank (Central Bank of Sweden).
    3. Hung-Ju Chen & Dongpeng Liu & Xiangbo Liu, 2018. "Social Status, Labour Market Frictions and Endogenous Growth," The Japanese Economic Review, Springer, vol. 69(2), pages 226-250, June.
    4. Andersen, Torben M. & Bhattacharya, Joydeep & Grodecka-Messi, Anna & Mann, Katja, 2024. "Pension reform and wealth inequality: Theory and evidence," European Economic Review, Elsevier, vol. 165(C).
    5. Acedański, Jan, 2017. "Heterogeneous expectations and the distribution of wealth," Journal of Macroeconomics, Elsevier, vol. 53(C), pages 162-175.
    6. Chen, Zhanhui & Yang, Bowen, 2019. "In search of preference shock risks: Evidence from longevity risks and momentum profits," Journal of Financial Economics, Elsevier, vol. 133(1), pages 225-249.
    7. 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.
    8. Wang, Wei & Suen, Richard M. H., 2015. "Diversity and Economic Growth in a Model with Progressive Taxation," MPRA Paper 67569, University Library of Munich, Germany.
    9. Andersen, Torben M. & Bhattacharya, Joydeep & Grodecka-Messi, Anna & Mann, Katja, 2024. "Pension reform and wealth inequality: Theory and evidence," ISU General Staff Papers 202409061340040000, Iowa State University, Department of Economics.
    10. Aristotelis Boukouras, 2016. "Capitalist Spirit and the Markets: Why Income Inequality Matters," Discussion Papers in Economics 16/16, Division of Economics, School of Business, University of Leicester.

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    More about this item

    Keywords

    Inequality; Heterogeneity; Time Preference; Human Capital;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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