Rising wealth inequality: Intergenerational links, entrepreneurship, and the decline in interest rate

Ayşe İmrohoroğlu and Kai Zhao

Journal of Monetary Economics, 2022, vol. 127, issue C, 86-104

Abstract: The share of wealth held by the top one percent of Americans has increased from about 24% in 1980 to 40% in 2010. This paper examines the role played by the decline in the world interest rates in accounting for this observation. Our model consists of households who either run a business or work for others. In this environment, the decline in the interest rate increases wealth inequality since entrepreneurs benefit from lower financing costs while workers face lower returns. This channel can account for over 60 percent of the increase in the top wealth shares in the data.

Keywords: Wealth inequality; Intergenerational links; Saving; Entrepreneurship; Lifecycle models (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Working Paper: Rising Wealth Inequality: Intergenerational Links, Entrepreneurship, and the Decline in Interest Rate (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:127:y:2022:i:c:p:86-104

DOI: 10.1016/j.jmoneco.2022.02.005

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