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Consequence of Heterogeneous Economic Rents under the MDC-based Procedure

Harashima, Taiji (2021): Consequence of Heterogeneous Economic Rents under the MDC-based Procedure.

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Abstract

If preferences of households are heterogeneous, there is no guarantee that a steady state exists other than corner solutions, and only the most advantaged household will eventually possess all the capital in the economy. This is also true if economic rents are obtained persistently and unevenly among households. I examine whether this is true even if households behave not on the basis of rational expectations but on the basis of keeping the most comfortable capital-wage ratio and show that there is no guarantee in this case as well.

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