Luxury Consumption, Precautionary Savings and Wealth Inequality

Claudio Campanale ()

No 423, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: Most macroeconomic models are based on the assumption of a single homogeneous consumption good. In the present paper we consider a model with two goods: A basic good and a luxury good. We then apply this assumption to a standard general equi- librium heterogeneous agent model. We ¯nd a substantial reduction in precautionary savings compared to a standard model. The e®ect on wealth inequality turns out to be ambiguous and to depend on the size of the assumed earnings risk.

Keywords: precautionary savings; wealth inequality; luxury consumption; non-homothetic utility (search for similar items in EconPapers)
JEL-codes: E21 (search for similar items in EconPapers)
Pages: pages 31
Date: 2015
New Economics Papers: this item is included in nep-dge and nep-mac
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Journal Article: Luxury consumption, precautionary savings and wealth inequality (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:423

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