Risk Aversion Heterogeneity, Risky Jobs and Wealth Inequality

Marco Cozzi

No 274550, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: This paper considers the macroeconomic implications of a set of empirical studies finding a high degree of dispersion in preferences for risk. It develops a model with risk aversion heterogene- ity, uninsurable idiosyncratic income risk, and (with or without) self-selection into risky jobs to quantify their effects on the distribution of wealth. The results show that the role of risk aversion heterogeneity is quantitatively important. When estimating the risk aversion distribution with the appropriate PSID data on income lotteries, the model matches the observed degree of wealth inequality in the U.S., accounting for both the wealth Gini index and other key features of the wealth distribution. It is also shown that neglecting risk preference heterogeneity has a first order effect on the aggregate allocations.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 57
Date: 2012-12
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Risk Aversion Heterogeneity, Risky Jobs and Wealth Inequality (2013)
Working Paper: Risk Aversion Heterogeneity, Risky Jobs And Wealth Inequality (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:274550

DOI: 10.22004/ag.econ.274550

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