How Important Is Discount Rate Heterogeneity for Wealth Inequality?

Lutz Hendricks ()

No 124, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: This paper investigates the role of discount rate heterogeneity for wealth inequality. The key idea is to infer the distribution of preference parameters from the observed age profile of wealth inequality. The contribution of preference heterogeneity to wealth inequality can then be measured using a quantitative life-cycle model. I find that discount rate heterogeneity increases the Gini coefficient of wealth by 0.06 to 0.11. The share of wealth held by the richest 1% of households rises by 0.03 to 0.13. The larger changes occur when altruistic bequests are large and when preferences are strongly persistent across generations. Discount rate heterogeneity also helps account for the large wealth inequality observed among households with similar lifetime earnings

Keywords: Wealth inequality; preference heterogeneity (search for similar items in EconPapers)
JEL-codes: E2 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dge
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.lhendricks.org/Research/Paper_WPref.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.lhendricks.org/Research/Paper_WPref.pdf [301 Moved Permanently]--> https://lhendricks.org/Research/Paper_WPref.pdf)

Related works:
Journal Article: How important is discount rate heterogeneity for wealth inequality? (2007)
Working Paper: How Important is Discount Rate Heterogeneity for Wealth Inequality? (2005)
Working Paper: How Important is Discount Rate Heterogeneity for Wealth Inequaltity (1970)
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:red:sed006:124

Access Statistics for this paper

More papers in 2006 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().