Finance and the Preservation of Wealth

Andrei Shleifer, Robert Vishny and Nicola Gennaioli

No 9890, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (GSV, 2014) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the ratio of financial income to GDP increases with the ratio of aggregate wealth to GDP. Both rise along the convergence path to steady state growth. We examine several further implications of the model for management fees, unit costs of finance, and the consequences of shocks to trust and to the capital stock.

Keywords: Finance income share; Wealth preservation (search for similar items in EconPapers)
JEL-codes: E00 G00 (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-gro and nep-mac
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Citations: View citations in EconPapers (32)

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Related works:
Journal Article: Finance and the Preservation of Wealth (2014)
Working Paper: Finance and the Preservation of Wealth (2014)
Working Paper: Finance and the Preservation of Wealth (2013)
Working Paper: Finance and the Preservation of Wealth
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