Income Distribution by Age Group and Productive Bubbles

Xavier Raurich and Thomas Seegmuller

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Abstract: The aim of this paper is to study the role of the distribution of income by age group on the existence of speculative bubbles. A crucial question is whether this distribution may promote a bubble associated to a larger level of capital, that is a productive bubble. We address these issues in an overlapping generations model where agents live three periods and productive investment done in the first period of life is an illiquid investment whose return occurs in the following two periods. A bubble is a liquid speculative investment that facilitates intertemporal consumption smoothing. We show that the distribution of income by age group determines both the existence and the effect of bubbles on aggregate production. We also show that fiscal policy, by changing the distribution of income, may facilitate or prevent the existence of bubbles and may also modify the effect that bubbles have on aggregate production.

Keywords: Bubble; Efficiency; Income Distribution; Overlapping Generations (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-dge and nep-fdg
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03660301v1
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Published in Macroeconomic Dynamics, 2022, 26 (3), pp.769-799. ⟨10.1017/S1365100520000371⟩

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Related works:
Journal Article: INCOME DISTRIBUTION BY AGE GROUP AND PRODUCTIVE BUBBLES (2022)
Working Paper: Income Distribution by Age Group and Productive Bubbles (2017)
Working Paper: Income distribution by age group and productive bubbles (2017)
Working Paper: Income Distribution by Age Group and Productive Bubbles (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03660301

DOI: 10.1017/S1365100520000371

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