Left and Right: A Tale of Two Tails of the Wealth Distribution

Marcello D'Amato, Christian Di Pietro and Marco Sorge
Additional contact information
Christian Di Pietro: University of Napoli Parthenope and CELPE.

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study a model of wealth accumulation in altruistic lineages, in which households face uninsurable risk, investment indivisibilities and credit market imperfections. A thick upper tail of the stationary distribution of wealth is shown to emerge as a robust prediction, irrespective of (i) the presence of multidimensional (wealth and ability) heterogeneity and non-convexities in human capital formation, and (ii) the nature of parental bequest motives (joy-of-giving vs. paternalism). Additionally, (iii) we identify conditions under which the unique, ergodic wealth distribution exhibits a mass point at the bottom of its support, where bequest incentives are inactive and social mobility can only occur via occupational upgrading within lineages. Our interest in the features of the left tail motivates the exploration of the effects of various frictions and fiscal measures on intergenerational wealth transmission and the persistence of inequality. We show that tax policies (e.g. capital income taxation) targeting top wealth inequality can dilate expected residence time of lineages in the lower states of the wealth space, providing a strong case for redistributive policies that favour access to education for the less wealthy.

Keywords: Wealth distribution; Wealth inequality; Capital income risk; Credit market imperfections; Educational investment. (search for similar items in EconPapers)
JEL-codes: D31 H20 I24 (search for similar items in EconPapers)
Date: 2023-11-03
New Economics Papers: this item is included in nep-fdg, nep-pub and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.csef.it/WP/wp691.pdf (application/pdf)

Related works:
Journal Article: Left and right: a tale of two tails of the wealth distribution (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:691

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().