Inequality, Redistributive Policies and Multiplier Dynamics in an Agent-based Model with Credit Rationing

Elisa Palagi, Mauro Napoletano, Andrea Roventini and Jean-Luc Gaffard
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Elisa Palagi: SSSUP - Scuola Universitaria Superiore Sant'Anna = Sant'Anna School of Advanced Studies [Pisa]

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Abstract: We build an agent-based model populated by households with heterogenous and timevarying financial conditions in order to study how different inequality shocks affect income dynamics and the effects of different types of fiscal policy responses. We show that inequality shocks generate persistent falls in aggregate income by increasing the fraction of credit-constrained households and by lowering aggregate consumption. Furthermore, we experiment with different types of fiscal policies to counter the effects of inequality-generated recessions, namely deficit-spending direct government consumption and redistributive subsidies financed by different types of taxes. We find that subsidies are in general associated with higher fiscal multipliers than direct government expenditure, as they appear to be better suited to sustain consumption of lower income households after the shock. In addition, we show that the effectiveness of redistributive subsidies increases if they are financed by taxing financial incomes or savings.

Keywords: Income inequality; Fiscal multipliers; Redistributive Policies; Credit-rationing; Agent-based models (search for similar items in EconPapers)
Date: 2017-11
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03455401v1
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Citations: View citations in EconPapers (5)

Published in Italian economic journal, 2017, 3 (3), pp.367 - 387. ⟨10.1007/s40797-017-0055-1⟩

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Related works:
Journal Article: Inequality, Redistributive Policies and Multiplier Dynamics in an Agent-based Model with Credit Rationing (2017)
Working Paper: Inequality, Redistributive Policies and multipliers dynamics in an agent based model with Credit rationing (2017)
Working Paper: Inequality, Redistributive Policies and Multiplier Dynamics in an Agent-Based Model with Credit Rationing (2017)
Working Paper: Inequality, Redistributive Policies and Multiplier Dynamics in an Agent-based Model with Credit Rationing (2017)
Working Paper: Inequality, redistributive policies and multiplierdynamics in an agent-based model with credit rationing (2017)
Working Paper: Inequality, redistributive policies and multiplierdynamics in an agent-based model with credit rationing (2017)
Working Paper: Inequality, Redistributive Policies and Multiplier Dynamics in an Agent-Based Model with Credit Rationing (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03455401

DOI: 10.1007/s40797-017-0055-1

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