Hostname: page-component-76fb5796d-9pm4c Total loading time: 0 Render date: 2024-04-27T00:51:28.052Z Has data issue: false hasContentIssue false
  • English
  • Français

THE DISTRIBUTION OF WEALTH IN THE BLANCHARD–YAARI MODEL

Published online by Cambridge University Press:  10 April 2014

Jess Benhabib ,
Alberto Bisin  and
Shenghao Zhu
Jess Benhabib*
Affiliation:
New York University
Alberto Bisin
Affiliation:
New York University
Shenghao Zhu
Affiliation:
National University of Singapore
*
Address correspondence to: Jess Benhabib, Department of Economics, New York University, 19 West 4th Street, 6th Floor, New York, NY 10012, USA; e-mail: jess.benhabib@nyu.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

We study the dynamics of the distribution of wealth in an economy with infinitely lived agents, intergenerational transmission of wealth, and redistributive fiscal policy. We show that wealth accumulation with idiosyncratic investment risk and uncertain lifetimes can generate a double Pareto wealth distribution.

Keywords

Wealth DistributionRate of Return RiskFat Tails
Type
Articles
Information
Macroeconomic Dynamics , Volume 20 , Issue 2: Complexity in Economic Systems , March 2016 , pp. 466 - 481
Copyright
Copyright © Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aiyagari, S.R. (1994) Uninsured idiosyncratic risk and aggregate saving. Quarterly Journal of Economics 109, 659–684.CrossRefGoogle Scholar
Benhabib, J. and Bisin, A. (2007) The Distribution of Wealth: Intergenerational Transmission and Redistributive Policies. New York University, http://www.nyu.edu/econ/user/bisina/ParetoDistribution2007.pdf.Google Scholar
Benhabib, J., Bisin, A., and Zhu, S. (2011) The distribution of wealth and fiscal policy in economies with finitely lived agents. Econometrica 79, 123–157.Google Scholar
Benhabib, J. and Zhu, S. (2008) Age, Luck and Inheritance. NBER working paper 14128.CrossRefGoogle Scholar
Blanchard, O.J. (1985) Debt, deficits, and finite horizons. Journal of Political Economy 93, 223–247.CrossRefGoogle Scholar
Cantelli, F.P. (1921) Sulla deduzione delle leggi di frequenza da considerazioni di probabilità. Metron 1, 83–91.Google Scholar
Castaneda, A., Diaz-Gimenza, J., and Rios-Rull, J. (2003) Accounting for the U.S. earnings and wealth inequality. Journal of Political Economy 111, 818–857.CrossRefGoogle Scholar
De Nardi, M. (2004) Wealth inequality and intergenerational links. Review of Economic Studies 71, 743–768.CrossRefGoogle Scholar
Huggett, M. (1996) Wealth distribution in life-cycle economies. Journal of Monetary Economics 38, 469–494.CrossRefGoogle Scholar
Kamien, M. and Schwartz, N. (1991), Dynamic Optimization: The Calculus of Variations and Optimal Control in Economics and Management, 2nd ed.New York: Elsevier.Google Scholar
Karlin, S. and Taylor, H. (1981) A Second Course in Stochastic Processes. New York: Academic Press.Google Scholar
Klass, O.S., Biham, O., Levy, M., Malcai, O., and Solomon, S. (2006) The Forbes 400 and the Pareto wealth distribution. Economics Letters 90, 290–295.CrossRefGoogle Scholar
Merton, R. (1992), Continuous-Time Finance. Cambridge, MA: Blackwell.Google Scholar
Meyn, S.P. and Tweedie, R.L. (1993) Markov Chains and Stochastic Stability. Berlin: Springer.CrossRefGoogle Scholar
Reed, W. (2001) The Pareto, Zipf and other power laws. Economics Letters 74, 15–19.CrossRefGoogle Scholar
Richard, S. (1975) Optimal consumption, portfolio and life insurance rules for an uncertain lived individual in a continuous time model. Journal of Financial Economics 2, 187–203.CrossRefGoogle Scholar
Ross, S.M. (1996) Stochastic Processes, 2nd ed.New York: Wiley.Google Scholar
Wolff, E.N. (2006) Changes in household wealth in the 1980s and 1990s in the United States. In Wolff, E.N. (ed.), International Perspectives on Household Wealth, pp. 107–150. Cheltenham, UK: Edward Elgar.CrossRefGoogle Scholar
Yaari, M. (1965) Uncertain lifetime, life insurance, and the theory of the consumer. Review of Economic Studies 32, 137–150.CrossRefGoogle Scholar
Zhu, S. (2010) Wealth Distribution under Iidiosyncratic Investment Risk. Mimeo, New York University.Google Scholar