Income and Wealth Heterogeneity in the Macroeconomy Export

@article{citeulike:1025541, abstract = {How do movements in the distribution of income and wealth affect the macroeconomy? We analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity. Our main finding is that, in the stationary stochastic equilibrium, the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution. This result is robust to substantial changes in both parameter values and model specification. Our benchmark model, whose only difference from the representative-agent framework is the existence of uninsurable idiosyncratic risk, displays far less cross-sectional dispersion and skewness in wealth than U.S. data. However, an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data. Furthermore, this extension features aggregate time series that depart significantly from permanent income behavior.}, author = {Krusell, Per and Smith, Anthony A.}, citeulike-article-id = {1025541}, citeulike-linkout-0 = {http://www.jstor.org/stable/2991488}, journal = {The Journal of Political Economy}, keywords = {411-2, liquidity}, number = {5}, pages = {867--896}, posted-at = {2007-01-04 22:40:57}, priority = {2}, title = {Income and Wealth Heterogeneity in the Macroeconomy}, url = {http://www.jstor.org/stable/2991488}, volume = {106}, year = {1998} }

TY - JOUR ID - citeulike:1025541 L3 - citeulike-article-id:1025541 N2 - How do movements in the distribution of income and wealth affect the macroeconomy? We analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity. Our main finding is that, in the stationary stochastic equilibrium, the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution. This result is robust to substantial changes in both parameter values and model specification. Our benchmark model, whose only difference from the representative-agent framework is the existence of uninsurable idiosyncratic risk, displays far less cross-sectional dispersion and skewness in wealth than U.S. data. However, an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data. Furthermore, this extension features aggregate time series that depart significantly from permanent income behavior. IS - 5 JF - The Journal of Political Economy EP - 896 TI - Income and Wealth Heterogeneity in the Macroeconomy VL - 106 SP - 867 KW - 411-2 KW - liquidity AU - Krusell, Per AU - Smith, Anthony PY - 1998/// UR - http://www.jstor.org/stable/2991488 ER -