Article ID Journal Published Year Pages File Type
957249 Journal of Economic Theory 2011 32 Pages PDF
Abstract
We explore the link between wealth inequality and output fluctuations in a general two-sector neoclassical growth model with endogenous labor and heterogeneous agents. When agents have homogeneous CRRA preferences and individual wealth is Pareto distributed, a sufficiently large rise in the Gini index typically leads to an increase in endogenous fluctuations of output. For general economies, we show that under plausible conditions on the fundamentals, wealth inequality is still a destabilizing factor.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,