The Geography of Wealth: Shocks, Mobility and Precautionary Savings

Maximiliano Dvorkin and Brian Greaney

No 2627, Working Papers from Federal Reserve Bank of Dallas

Abstract: The spatial distribution of wealth in the United States is very heterogeneous. We study the spatial distribution of wealth in a country and how it is shaped by regional earning characteristics and mobility frictions. For this, we develop a tractable model of consumption, savings and location choice with many regions, incomplete markets and heterogeneous agents facing persistent and transitory income shocks. Our theory extends a workhorse macroeconomic model of consumption and savings under uncertainty to an economy with multiple labor markets and costly mobility. Despite complex spatial and individual heterogeneity, we characterize the optimal consumption, savings and mobility decisions of workers in closed form. Mobility frictions increase precautionary savings as workers hedge against consumption fluctuations generated by moving decisions. The spatial distribution of wealth is primarily driven by the interaction between persistent income shocks, saving behavior and worker sorting over locations. Our results highlight the importance of accounting for worker mobility and regional heterogeneity in earnings dynamics when studying the spatial distribution of wealth.

Keywords: mobility; precautionary savings; spatial equilibrium; wealth; inequality (search for similar items in EconPapers)
JEL-codes: E21 F16 J61 R12 R23 (search for similar items in EconPapers)
Date: 2026-08-17
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Working Paper: The geography of wealth: shocks, mobility, and precautionary savings (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:103686

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DOI: 10.24149/wp2627

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