Nakamoto, Yasuhiro (2015): Heterogeneous EIS and Wealth Distribution in a Neoclassical Growth Model.

PDF
MPRA_paper_67026.pdf Download (286kB)  Preview 
Abstract
We introduce the heterogeneities of EIS (elasticities of intertemporal substitution) into the Ramsey version of macrodynamic model with a finite number of agents. The assumption that the degrees of EIS differ among agents means that our economy has various growth rate of private consumption. Then, our contributions are as follows. First, we analytically characterize the steadystate levels of individual capital. Second, we analytically examine the role of heterogeneous EIS for the wealth inequality. Finally, we give numerical examples to see the complicated dynamic motion and the steadystate characterization of wealth inequality.
Item Type:  MPRA Paper 

Original Title:  Heterogeneous EIS and Wealth Distribution in a Neoclassical Growth Model 
Language:  English 
Keywords:  Heterogeneous agents, Elasticity of intertemporal substitution, Convergence speed, Wealth distribution 
Subjects:  C  Mathematical and Quantitative Methods > C0  General > C00  General E  Macroeconomics and Monetary Economics > E1  General Aggregative Models > E13  Neoclassical E  Macroeconomics and Monetary Economics > E2  Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20  General 
Item ID:  67026 
Depositing User:  Yasuhiro Nakamoto 
Date Deposited:  08 Oct 2015 13:42 
Last Modified:  04 Oct 2019 17:03 
References:  AlvarezPelaez, M., and Diaz, A., (2005), "Minimum consumption and transitional dynamics in wealth distribution", Journal of Monetary Economics 52, 663667. Arrow, K., (1970), Essays in the theory of riskbearing. North Holland. Atolia, M., Chatterjee, S., and Turnovsky, S., (2012), "Growth and inequality: Dependence on the time path of productivity increases (and other structural changes)", Journal of Economic Dynamics and Control 36, 331348. Barro, R., and SalaiMartin, X., (2004), Economic growth (second edition), The MIT Press. Becker. R., (1980), "On the longrun steady state in a simple dynamic model of equilibrium with heterogeneous households", Quarterly Journal of Economics 95, 375382. Caselli, F., and Ventura, J., (2000), "A representative consumer theory of distribution", American Economic Review 90, 909926. Champernowne, D., (1953), "A model of income distribution", Economic Journal 63, 318351. Clementi, F., and Gallegati, M., (2005), "Power law tails in the Italian personal income distribution", Physica A: Statistical Mechanics and its Applications 350, 427438. CoenPirani, D., (2004), "Effects of differences in risk aversion on the distribution of wealth", Macroeconomic Dynamics 8, 612632. CoenPirani, D., (2005), "Margin requirements and equilibrium asset prices", Journal of Monetary Economics 52, 449475. Drvagulescu, A., and Yakovenko, V., (2001), "Exponential and powerlaw probability distributions of wealth and income in the United Kingdom and the United States", Physica A: Statistical Mechanics and its Applications 299, 213221. Eekhoudt, L., Gollier, C., and Schlesinger, H., (1996), "Changes in background risk and risk taking behavior", Econometrica 64, 683689. Epstein, L., (1987a), "A simple dynamic general equilibrium model", Journal of Economic Theory 41, 6895. Esptein, L., (1987b), "The global stability of efficient intertemporal allocations", Econometrica 55, 329355. Epstein, L., and Zin, S., (1989), "Substitution, risk aversion and the temporal behavior of consumption and asset returns: a theoretical framework", Econometrica 57, 937969. Friend, I., and Blume, M.E., 1975, The demand for risky assets, American Economic Review 65, 900922. GarciaPenalosa, C. and Turnovsky, S. (2006), "Growth and Income Inequality: A Canonical Model", Economic Theory 28, 2549. GarciaPenalosa, C. and Turnovsky, S. (2007), "Growth, income inequality and fiscal policy: what are the relevant tradeoffs?", Journal of Money, Credit and Banking 39, 369394. GarciaPenalosa, C. and Turnovsky, S. (2009), "The dynamics of wealth inequality in a simple Ramsey model: a note on the role of production flexibility", Macroeconomic Dynamics 13, 250262. Gibrat, (1931), Les inegalites economiques. Paris 1931. Guiso, L., and Paiella, M., (2008), "Risk aversion, wealth, and background risk", Journal of the European Economic Association 6, 11091150. Holt and Laury, (2002), "Risk aversion and incentive effects", American Economic Review 92, 16441655. Kalecki, M., (1945), "On the Gibrat distribution", Econometrica 13, 161170. Kimball, M., (1993), "Standard risk aversion", Econometrica 61, 589611. Li, W., Rychlik, M., Szidarovszky, F., and Chiarella, C., (2003), "On the attractivity of a class of homogeneous dynamic economic systems", Nonlinear Analysis 52, 16171636. Mandelbrot, B., (1960), "The ParetoLevy law and the distribution of income", International Economic Review 1, 79106. Montroll, E., and Shlesinger, M. 1983, Maximum entropy formalism, fractals, scaling phenomena, and 1/f noise: a tale of tails, Journal of Statistical Physics 32, 209230. Outreville, F., (2013), "The relationship between relative risk aversion and the level of eduction: a survey and implications for the demand for life insurance", Journal of Economic Surveys, 115. Pareto, V., (1987), Cours d'Economie Politique. Lausanne and Paris: Rouge and Cie. Pratt, J., and Zeckhauser, R., (1987), "Proper risk aversion", Econometrica 55, 143154. Reed, W., (2003), "The Pareto law of incomesan explanation and an extension", Physica A: Statistical Mechanics and its Applications 319, 469486. Sarte, G., (1997), "Progressive taxation and income inequality in dynamic competitive equilibrium", Journal of Public Economics 66, 145171. Sorger, G., (2000), "Income and wealth distribution in a simple model of growth", Economic Theory 16, 2342. Souma, W., (2001), "Universal structure of the personal income distribution", Fractals 9, 463470. Tanaka, T., Camerer, C., and Nguyen, Q., 2010, "Risk and time preferences: Linking experimental and household survey data from Vietnam", American Economic Review 15, page 557571. Turnovsky, S., (2002), "Intertemporal and Intratemporal Substitution, and the Speed of Convergence in the Neoclassical Growth Model", Journal of Economic Dynamics and Control 26, 17651785. Turnovsky, S., and GarciaPenalosa, C. (2008),"Distributional dynamics in a neoclassical growth model: The role of elastic labor supply", Journal of Economic Dynamics and Control 32, 13991431. Wolff, E., (1998), "Recent trends in the size distribution of household wealth", Journal of Economic Perspective 12, 131150. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/67026 