Structural change and inequality in general equilibrium

Krzysztof Makarski, Joanna Tyrowicz and Jan Lutynski
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Jan Lutynski: Group for Research in Applied Economics (GRAPE)

No 67, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: We study the evolution of wealth inequality in an economy undergoing structural change. Economic intuition hints that structural change should imply increased income inequality, at least transiently. Economic intuition is more ambiguous for the effects on wealth inequality. On the one hand, increased dispersion in incomes implies increased dispersion in the ability to accumulate wealth across individuals. On the other hand, workers experience greater uncertainty, which may push them to more precautionary savings, which works towards equalizing wealth distribution. The net effect of these two opposing forces is essentially an empirical question. We build an overlapping generations model which features heterogeneous sectors and workers. Using this model, we quantify the role of demographics and the structural change in the evolution of wealth inequality in Poland as of 1990.

Keywords: structural change; demographic change; inequality (search for similar items in EconPapers)
JEL-codes: D63 E20 L16 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2022
New Economics Papers: this item is included in nep-dge and nep-tra
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