Inequality and Aggregate Savings in the Neoclassical Growth Model

Reto Foellmi

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: Within the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporal elasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.

Keywords: Marginal propensity to consume; income distribution; growth; concave consumption funktion (search for similar items in EconPapers)
JEL-codes: D30 O10 O40 (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-dev and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Inequality and Aggregate Savings in the Neoclassical Growth Model (2009)
Working Paper: Inequality and aggregate savings in the neoclassical growth model (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp1011

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