Wealth distribution and output fluctuations

Christian Ghiglino and Alain Venditti

Journal of Economic Theory, 2011, vol. 146, issue 6, 2478-2509

Abstract: We explore the link between wealth inequality and output fluctuations in a general two-sector neoclassical growth model with endogenous labor and heterogeneous agents. When agents have homogeneous CRRA preferences and individual wealth is Pareto distributed, a sufficiently large rise in the Gini index typically leads to an increase in endogenous fluctuations of output. For general economies, we show that under plausible conditions on the fundamentals, wealth inequality is still a destabilizing factor.

Keywords: Wealth inequality; Pareto distribution; Gini index; Elastic labor supply; Endogenous equilibrium business cycles (search for similar items in EconPapers)
JEL-codes: D30 D50 D90 O41 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:146:y:2011:i:6:p:2478-2509

DOI: 10.1016/j.jet.2011.06.004

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