Ergodic Chaos and Aggregate Stability: A Deterministic Discrete-Choice Model of Wealth Distribution Dynamics

Takashi Kamihigashi

No DP2012-20, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper studies wealth distribution dynamics in a small open economy with a continuum of consumers indexed by initial wealth. Each of them solves a discrete-choice problem whose optimal policy function exhibits ergodic chaos. We show that for any initial distribu- tion of wealth given by a density, the wealth distribution converges to a unique invariant distribution, and aggregate wealth converges to the corresponding value. Thus ergodic chaos leads to aggregate stability rather than instability. These results are illustrated with various nu- merical examples.

Keywords: Aggregation; Ergodic chaos; Stability; Discrete choice; Wealth distribution; Frobenius-Perron operator (search for similar items in EconPapers)
JEL-codes: C43 C60 D31 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2012-07
New Economics Papers: this item is included in nep-dcm
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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2012-20.pdf First version, 2012 (application/pdf)

Related works:
Journal Article: Ergodic chaos and aggregate stability: A deterministic discrete-choice model of wealth distribution dynamics (2013)
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