Daniel Carroll and
Eric Young ()
No 1634, Working Papers (Old Series) from Federal Reserve Bank of Cleveland
This paper studies short-run wealth mobility in a heterogeneous agents, incomplete-markets model. Wealth mobility has a ?hump-shaped? relationship with the persistence of the stochastic process governing labor income: low when shocks are close to i.i.d. or close to a random walk, and higher in between. The standard incomplete markets framework features less wealth mobility than found in the PSID wealth supplements. We include features commonly used in the literature to capture wealth inequality and find that they do little to improve the model?s performance for wealth mobility. Finally, we introduce state-contingent assets, which allow households to partially span the space of labor productivity. Moving toward a more ?complete? market lowers wealth mobility unless the labor income process is very persistent.
Keywords: wealth mobility; inequality; incomplete markets (search for similar items in EconPapers)
JEL-codes: D31 D52 E21 (search for similar items in EconPapers)
Pages: 51 pages
New Economics Papers: this item is included in nep-dge and nep-mac
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.clevelandfed.org/newsroom-and-events/p ... p-1634-mobility.aspx Full text (text/html)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:1634
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().