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Inequality and Aggregate Savings in the Neoclassical Growth Model


Foellmi, Reto (2008). Inequality and Aggregate Savings in the Neoclassical Growth Model. Working paper series / Institute for Empirical Research in Economics No. 395, University of Zurich.

Abstract

Within the context of the neoclassical growth model I investigate the implicationsnof (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporalnelasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.

Abstract

Within the context of the neoclassical growth model I investigate the implicationsnof (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporalnelasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:November 2008
Deposited On:29 Nov 2011 22:47
Last Modified:07 Dec 2017 10:16
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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