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Transitional Dynamics and the Distribution of Assets

  • Francesc Obiols-Homs

    (Centro de Investigacion Economica, ITAM)

  • Carlos Urrutia

    (Centro de Investigacion Economica, ITAM)

We study the evolution of the distribution of assets in a discrete time, de-terministic growth model with log-utility, a minimum consumption require-ment, Cobb-Douglas technology, and agents differing in initial assets. We prove that the coefficient of variation in assets across agents decreases mono-tonically in a transition to the steady state from below, if (i) the consumption requirement is zero, or (ii) the consumption requirement is not too big and the initial capital stock is large enough. We also show how a positive consumption requirement or a small elasticity of substitution between capital and labor can generate non-monotonic paths for inequality.

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File URL: http://128.118.178.162/eps/mac/papers/0407/0407020.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0407020.

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Length: 25 pages
Date of creation: 17 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0407020
Note: Type of Document - pdf; pages: 25
Contact details of provider: Web page: http://128.118.178.162

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  1. Chatterjee, S. & Ravikumar, B., 1997. "Minimum Consumption Requirements: Theoretical and Quantitative Implications for Growth and Distribution," Working Papers 97-15, University of Iowa, Department of Economics.
  2. Jaume Ventura & Francesco Caselli, 2000. "A Representative Consumer Theory of Distribution," American Economic Review, American Economic Association, vol. 90(4), pages 909-926, September.
  3. Huggett, Mark & Ventura, Gustavo, 2000. "Understanding why high income households save more than low income households," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 361-397, April.
  4. Hernandez D, Alejandro, 1991. "The dynamics of competitive equilibrium allocations with borrowing constraints," Journal of Economic Theory, Elsevier, vol. 55(1), pages 180-191, October.
  5. Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December.
  6. repec:cup:macdyn:v:3:y:1999:i:4:p:482-505 is not listed on IDEAS
  7. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July.
  8. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
  9. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
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