Left and right: a tale of two tails of the wealth distribution

Marcello D’Amato (), Christian Di Pietro () and Marco Sorge
Additional contact information
Marcello D’Amato: University of Napoli Suor Orsola Benincasa
Christian Di Pietro: University of Napoli Parthenope

Economic Theory, 2024, vol. 78, issue 4, No 10, 1389-1433

Abstract: Abstract We study a model of wealth accumulation in altruistic lineages, in which households face uninsurable risk, investment indivisibilities and borrowing constraints. A thick upper tail of the stationary distribution of wealth is shown to emerge as a robust prediction, irrespective of (1) the presence of multidimensional (wealth and ability) heterogeneity and non-convexities in human capital formation, and (2) the nature of parental bequest motives (joy-of-giving vs. paternalism). Additionally, (3) we identify conditions under which the unique, ergodic wealth distribution exhibits a mass point at the bottom of its support, where credit market imperfections continue to affect, along the convergence process, the structure of wealth transitions at the lineage level. Motivated by these results, we then analyze the sensitivity of the left tail to various frictions and fiscal instruments that affect bequest strategies and the ensuing transmission of wealth across generations. In particular, capital income or bequest taxes with no redistribution may reinforce economic mechanisms underpinning mobility traps in the left tail, thereby increasing the persistence of households in the lowest tiers of the wealth distribution.

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: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00199-024-01581-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Left and Right: A Tale of Two Tails of the Wealth Distribution (2023)
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:spr:joecth:v:78:y:2024:i:4:d:10.1007_s00199-024-01581-w

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-024-01581-w

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().