Heterogeneity in Macroeconomics: The Compositional Inequality Perspective

Marco Ranaldi and Elisa Palagi ()

No 848, LIS Working papers from LIS Cross-National Data Center in Luxembourg

Abstract: This work presents a framework to jointly study individuals’ heterogeneity in terms of their capital and labor endowments (endowment heterogeneity) and of their saving and consumption behaviors (behavioral heterogeneity), from an empirical perspective. By adopting a newly developed synthetic measure of compositional inequality, this work classifies more than 20 economies across over two decades on the basis of their heterogeneity characteristics. Modern economies are far from being characterized by agents with same propensities to save and consume and same endowments (Representative Agent systems), or by the existence of rich capital-abundant savers and poor hand-to-mouth consumers (Kaldorian systems). Our framework and results are discussed in light of the heterogeneity assumptions underlying several types of macroeconomic models with heterogeneous agents (Kaldorian, TANK & HANK, OLG, and ABM models). A negative relationship between behavioral heterogeneity and the economy’s saving rate is also documented.

JEL-codes: D31 O43 P10 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-10
New Economics Papers: this item is included in nep-des and nep-hme
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Published in International Inequalities Institute Working Paper 85, (2022). London School of Economics and Political Science, London, UK. https://eprints.lse.ac.uk/117127/1/Ranaldi_heterogeneity_in_macroeconomics.pdf

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Related works:
Working Paper: Heterogeneity in macroeconomics: the compositional inequality perspective (2022)
Working Paper: Heterogeneity in Macroeconomics: The Compositional Inequality Perspective (2022)
Working Paper: Heterogeneity in Macroeconomics: The Compositional Inequality Perspective (2022)
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