Distributional dynamics in a neoclassical growth model: The role of elastic labor supply

Stephen J Turnovsky and Garci­a-Peñalosa, Cecilia
Authors registered in the RePEc Author Service: Cecilia Garcia-Penalosa ()

Journal of Economic Dynamics and Control, 2008, vol. 32, issue 5, 1399-1431

Abstract: We examine the evolution of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowment and where the labor supply is endogenous. The assumption that the utility function is homogeneous implies that the macroeconomic equilibrium is independent of the distribution of wealth and allows us to characterize fully income and wealth dynamics. We find that although the dynamics of the distribution of wealth are similar under fixed and flexible labor, those of the income distribution are not. In response to a structural change, income inequality may move in opposite ways depending on whether or not the labor supply is fixed.

Date: 2008
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Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:32:y:2008:i:5:p:1399-1431

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