The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth

Ana Moro-Egido and Jordi Caballé
Authors registered in the RePEc Author Service: Jordi Caballe ()

No 352, Working Papers from Barcelona School of Economics

Abstract: In this paper, we analyze how the introduction of habits and aspirations affects the distribution of wealth when individuals' labor productivity is subject to idiosyncratic shocks and bequests arise from a joy-of-giving motive. In the presence of either bequests or aspirations, labor income shocks are transmitted intergenerationally and this transmission, together with the contemporaneous income shocks, determines the stationary distribution of wealth. We show that the introduction of aspirations increases both the intragenerational variability of wealth and the corresponding degree of intergenerational mobility. The opposite result holds when habits are introduced. Finally, we discuss how aspirations and habits interact with the redistributive features of an unfunded social security system.

Keywords: aspirations; habits; Wealth Distribution; Social Security (search for similar items in EconPapers)
JEL-codes: D31 E21 E62 (search for similar items in EconPapers)
Date: 2015-09
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Related works:
Working Paper: The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth (2008)
Working Paper: The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:352

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