Determinants of Wealth Inequality and Mobility in General Equilibrium

Thomas Fischer

No 2019:22, Working Papers from Lund University, Department of Economics

Abstract: What determines inequality and mobility of wealth? This paper quantifies in closed form both the bottom and the top (Pareto) tail of the distribution for a rich continuous-time model. The distribution is especially shaped by bequest motives, demographics, and the asset portfolio composition under idiosyncratic wealth risk. Factors that increase inequality also reduce mobility. The model - enriched by a realistic income process and non-trivial portfolio constraints - is solved in general equilibrium and calibrated to match US evidence. A bequest tax is shown to reduce inequality and increase mobility. Several partial-equilibrium intuitions do not carry over into general equilibrium.

Keywords: wealth inequality; mobility of wealth; portfolio selection; fat tails; bequest tax (search for similar items in EconPapers)
JEL-codes: C68 D31 E21 G11 H23 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2019-12-19
New Economics Papers: this item is included in nep-dge, nep-mac, nep-ore and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2019_022

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