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Capital Market Risk and the Dynamics of the Income Distribution


  • Martin Cripps


This paper introduces a dynamic model of the wealth distribution with aggregate risk in the capital market; the model combines credit rationing and portfolio selection decisions. In a closed economy the long-run behaviour of wealth is independent of the initial income distribution when there is aggregate uncertainty, although further restrictions are necessary when there is no aggregate uncertainty. There can be credit rationing at the long-run equilibrium. In poor economies aggregate risk in the capital market slows growth, whereas in richer economies a risky capital market is good for income growth.

Suggested Citation

  • Martin Cripps, 1999. "Capital Market Risk and the Dynamics of the Income Distribution," CSGR Working papers series 33/99, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
  • Handle: RePEc:wck:wckewp:33/99

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    References listed on IDEAS

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    Wealth Distribution; Dynamics; Uncertainty.;

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