Information and Wealth Heterogeneity in the Macroeconomy

Kurt Mitman, Tobias Broer, Alexandre Kohlhas and Kathrin Schlafmann

No 15934, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We document systematic differences in macroeconomic expectations across U.S. households and rationalize our findings with a theory of information choice. We embed this theory into an incomplete-markets model with aggregate risk. Our model is quantitatively consistent with the pattern of expectation heterogeneity in the data. Relative to a full-information counterpart, our model implies substantially increased macroeconomic volatility and inequality. We show through the example of a wealth tax that neglecting the information channel leads to erroneous conclusions about the effects of policies. While in the model without information choice a wealth tax reduces wealth inequality, in our framework it reduces information acquired in the economy, leading to increased volatility and higher wealth inequality in equilibrium.

Keywords: Heterogenous information; Unemployment; Incomplete markets; Precautionary savings (search for similar items in EconPapers)
JEL-codes: D84 E21 E27 E62 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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