How Important is Discount Rate Heterogeneity for Wealth Inequaltity

Lutz Hendricks ()

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper investigates the role of discount rate heterogeneity for wealth inequality. The key idea is to infer the distribution of preference parameters from the observed age profile of wealth inequality. The contribution of preference heterogeneity to wealth inequality can then be measured using a quantitative life-cycle model. I find that discount rate heterogeneity increases the Gini coefficient of wealth by around 0.07 to levels that are close to the data. The share of wealth held by the richest 1% of households rises by around 0.04, but falls short of the data by more than ten percentage points. Discount rate heterogeneity also helps account for the large wealth inequality observed among households with similar lifetime earnings.

Date: 1970-01-01
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Economic Dynamics and Control, September 2007, vol. 31 no. 9, pp. 3042-3068

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: How important is discount rate heterogeneity for wealth inequality? (2007)
Working Paper: How Important Is Discount Rate Heterogeneity for Wealth Inequality? (2006)
Working Paper: How Important is Discount Rate Heterogeneity for Wealth Inequality? (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:12724

Access Statistics for this paper

More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().