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Time Preference and the Distributions of Wealth and Income

Richard M. H. Suen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a dynamic competitive equilibrium model in which heterogeneity in time preferences alone can generate the observed patterns of wealth and income inequality in the United States. This model generalizes the standard deterministic neoclassical growth model by introducing (i) a direct preference for wealth by the consumers and (ii) human capital formation. The first feature prevents the wealth distribution from collapsing into a degenerate distribution. The second feature generates a strong positive correlation between earnings and wealth across agents. A calibrated version of this model is able to replicate the wealth and income distributions of the United States.

Keywords: Inequality; Heterogeneity; Time Preference; Human Capital (search for similar items in EconPapers)
JEL-codes: D31 E21 O15 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-dge and nep-hrm
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Downloads: (external link)
https://mpra.ub.uni-muenchen.de/26021/1/MPRA_paper_26021.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/36066/2/MPRA_paper_36066.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/39886/3/MPRA_paper_39886.pdf revised version (application/pdf)

Related works:
Journal Article: TIME PREFERENCE AND THE DISTRIBUTIONS OF WEALTH AND INCOME (2014) Downloads
Working Paper: Time Preference and the Distribution of Wealth and Income (2012) Downloads
Working Paper: Time Preference and the Distributions of Wealth and Income (2010) Downloads
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