Determinants of Wealth Inequality and Mobility in General Equilibrium

Research output: Working paper

Abstract

What determines inequality and mobility of wealth? This paper quantifies in closed form both the bottom and the top (Pareto) tail of the distribution for a rich continuous-time model. The distribution is especially shaped by bequest motives, demographics, and the asset portfolio composition under idiosyncratic wealth risk. Factors that increase inequality also reduce mobility. The model - enriched by a realistic income process and non-trivial portfolio constraints - is solved in general equilibrium and calibrated to match US evidence. A bequest tax is shown to reduce inequality and increase mobility. Several partial-equilibrium intuitions do not carry over into general equilibrium.

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Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics

Keywords

  • wealth inequality, mobility of wealth, portfolio selection, fat tails, bequest tax, C68, D31, E21, G11, H23
Original languageEnglish
Number of pages59
Publication statusPublished - 2019
Publication categoryResearch

Publication series

NameWorking Papers
PublisherLund University, Department of Economics
No.2019:22