Hostname: page-component-7dd5485656-bvgqh Total loading time: 0 Render date: 2025-10-31T16:06:55.793Z Has data issue: false hasContentIssue false
  • English
  • Français

THE DYNAMICS OF WEALTH INEQUALITY IN A SIMPLE RAMSEY MODEL: A NOTE ON THE ROLE OF PRODUCTION FLEXIBILITY

Published online by Cambridge University Press:  01 April 2009

Cecilia García-Peñalosa  and
Stephen J. Turnovsky
Cecilia García-Peñalosa*
Affiliation:
CNRS and GREQAM, Marseille
Stephen J. Turnovsky
Affiliation:
University of Washington, Seattle
*
Address correspondence to: Cecilia García-Peñalosa, GREQAM, Centre de la Vieille Charité, 2 rue de la Charité, 13236 Marseille, France; e-mail: penalosa@ehess.univ-mrs.fr.
Get access Rights & Permissions [Opens in a new window]

Abstract

It has been shown that the Ramsey growth model with agents that differ in their initial wealth endowments is compatible with a wide range of distributional outcomes, yet it is difficult to characterize under which circumstances the distribution of wealth becomes more or less unequal. In this note, we characterize the steady state distribution of wealth and compare it to the initial distribution, obtaining analytical conditions for one to be more skewed than the other. We show that whether wealth inequality increases or decreases during the transition to the steady state depends on simple and intuitive conditions on parameter values. Standard values for these parameters indicate that it is more likely that wealth inequality decreases as the economy accumulates capital.

Keywords

GrowthWealth DistributionTransitional Dynamics

Information

Type
Notes
Information
Macroeconomic Dynamics , Volume 13 , Issue 2 , April 2009 , pp. 250 - 262
Copyright
Copyright © Cambridge University Press 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

REFERENCES

Antràs, P. (2004) Is the U.S. aggregate production function Cobb-Douglas? New estimates of the elasticity of substitution. Contribution to Macroeconomics 4, 1–34.Google Scholar
Barro, R.J. (1990) Government spending in a simple model of endogenous growth. Journal of Political Economy 98, S103–S125.CrossRefGoogle Scholar
Berndt, E.R. (1976) Reconciling alternative estimates of the elasticity of substitution. Review of Economics and Statistics 58, 59–68.CrossRefGoogle Scholar
Bertola, G., Foellmi, R., and Zweimüller, J. (2006) Income Distribution in Macroeconomic Models. Princeton, NJ, and Oxford, UK: Princeton University Press.Google Scholar
Blanchard, O.J. and Fisher, S. (1989) Lectures on Macroeconomics. Cambridge, MA: MIT Press.Google Scholar
Caselli, F. and Ventura, J. (2000) A representative consumer theory of distribution. American Economic Review 90, 909–926.CrossRefGoogle Scholar
Chatterjee, S. (1994) Transitional dynamics and the distribution of wealth in a neoclassical growth model. Journal of Public Economics 54, 97–119.CrossRefGoogle Scholar
Glachant, J. and Vellutini, C. (2002) Quantifying the relationship between wealth distribution and aggregate growth in the Ramsey model. Economics Letters 74, 237–241.CrossRefGoogle Scholar
Guvenen, F. (2006) Reconciling conflicting evidence on the elasticity of intertemporal substitution: A macroeconomic perspective. Journal of Monetary Economics 53, 1451–1472.CrossRefGoogle Scholar
Kirman, A.P. (1992) Whom or what does the representative individual represent? Journal of Economic Perspectives 6, 117–136.CrossRefGoogle Scholar
Klump, R., McAdam, P., and Willman, A. (2007) Factor substitution and factor augmenting technological progress in the US. Review of Economics and Statistics 89, 183–192.CrossRefGoogle Scholar
Jones, C. (1995) R&D based models of economic growth. Journal of Political Economy 103, 759–784.CrossRefGoogle Scholar
Lucas, R.E. (1988) On the mechanics of economic development. Journal of Monetary Economics 22, 3–42.CrossRefGoogle Scholar
Obiols-Homs, F. and Urrutia, C. (2005) Transitional dynamics and the distribution of assets. Economic Theory 25, 381–400.CrossRefGoogle Scholar
Piketty, T., Postel-Vinay, G., and Rosenthal, J.L. (2006) Wealth concentration in a developing economy: Paris and France, 1807–1994. American Economic Review 96, 236–256.CrossRefGoogle Scholar
Ramsey, F.P. (1928) A mathematical theory of saving. The Economic Journal 38, 543–559.CrossRefGoogle Scholar
Sorger, G. (2000) Income and wealth distribution in a simple growth model. Economic Theory 16, 23–42.CrossRefGoogle Scholar
Turnovsky, S.J. (2002) Intertemporal and intratemporal substitution and the speed of convergence in the neoclassical growth model. Journal of Economic Dynamics and Control 26, 1765–1785.CrossRefGoogle Scholar
Turnovsky, S.J. and García-Peñalosa, C. (2008) Distributional dynamics in a neoclassical growth model: The role of elastic labor supply. Journal of Economic Dynamics and Control 32, 1399–1431.CrossRefGoogle Scholar
Vissing-Jørgensen, A. and Attanasio, O.P. (2003) Stock-market participation and the elasticity of intertemporal substitution. American Economic Review, Papers and Proceedings 93, 383–391.CrossRefGoogle Scholar