Polarization under incomplete markets and endogenous labor productivity

Albert Marcet and Francesc Obiols-Homs ()

No 274, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: We explore the accumulation of assets in the presence of limited insurance against idiosyncratic shocks, borrowing constraints and endogenous labor productivity due to the so-called "nutrition curve". We show that in such an environment, any stationary equilibrium is characterized by a polarized distribution of wealth. That is, there are only extremely rich and extremely poor agents.

Keywords: idiosyncratic shocks; incomplete markets; labor supply; wealth distribution (search for similar items in EconPapers)
JEL-codes: D52 D58 J22 (search for similar items in EconPapers)
Date: 2006
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Working Paper: Polarization under incomplete markets and endogenous labor productivity (2009)
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