Munich Personal RePEc Archive

Wealth and the Capitalist Spirit

Francis, Johanna L. (2007): Wealth and the Capitalist Spirit.

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Abstract

The wealth distribution in the U.S. is more unequal, or skewed to the right, than either the income or earnings distribution, a fact current models of saving behavior have difficulty explaining. Using Max Weber's (1905) idea that individuals may have a `capitalist spirit', I construct and simulate a model where some individuals accumulate wealth for its own sake rather than as deferred consumption. Including capitalist-spirit preferences in the standard life cycle model, with no other modifications, generates a skewness of wealth consistent with that observed in the U.S. economy. Furthermore, capitalist-spirit preferences provide a way to generate decreasing risk aversion with increases in wealth without resorting to idiosyncratic rates of time preference.

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