Income and Wealth Distribution in Macroeconomics: A Continuous-Time Approach

Yves Achdou, Jiequn Han, Jean-Michel Lasry, Pierre-Louis Lions () and Benjamin Moll
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Yves Achdou: LJLL (UMR_7598) - Laboratoire Jacques-Louis Lions - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité
Jiequn Han: Princeton University
Jean-Michel Lasry: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Pierre-Louis Lions: Collège de France - Chaire Équations aux dérivées partielles et applications - CdF (institution) - Collège de France
Benjamin Moll: Princeton University

Working Papers from HAL

Abstract: We recast the Aiyagari-Bewley-Huggett model of income and wealth distribution in continuous time. This workhorse model – as well as heterogeneous agent models more generally – then boils down to a system of partial differential equations, a fact we take advantage of to make two types of contributions. First, a number of new theoretical results: (i) an analytic characterization of the consumption and saving behavior of the poor, particularly their marginal propensities to consume; (ii) a closed-form solution for the wealth distribution in a special case with two income types; (iii) a proof that there is a unique stationary equilibrium if the intertemporal elasticity of substitution is weakly greater than one; (iv) characterization of "soft" borrowing constraints. Second, we develop a simple, efficient and portable algorithm for numerically solving for equilibria in a wide class of heterogeneous agent models, including – but not limited to – the Aiyagari-Bewley-Huggett model.

Keywords: Microecocomics; Market structure; Distribution; Macroeconomics; Consumption; Investment (search for similar items in EconPapers)
Date: 2017-08
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05313795

DOI: 10.3386/w23732

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