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Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies

Ghiglino, Christian and Venditti, Alain (2007) Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies. [["eprint_typename_scholarly-edition" not defined]]

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Abstract

We explore the link between wealth inequality, preference heterogeneity and macroeconomic volatility in a two-sector neoclassical growth model. First we prove that, if agents have homogeneous preferences, when the absolute risk tolerance is a strictly convex (concave) function, sufficiently high (low) levels of wealth inequality may lead to endogenous fluctuations in the neighborhood of the steady state. Second, we consider the effects of preference heterogeneity when agents are homogeneous with respect to their wealth. We show that when the utility function belongs to the HARA class, sufficiently high levels of preference heterogeneity may lead to endogenous fluctuations in the neighborhood of the steady state if the elasticity of intertemporal substitution in consumption is greater than one. © 2006 Elsevier Inc. All rights reserved.

Item Type: ["eprint_typename_scholarly-edition" not defined]
Additional Information: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00279997
Uncontrolled Keywords: heterogeneity; income inequality; macroeconomic volatility; endogenous fluctuations
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 16 Jul 2012 20:24
Last Modified: 15 Jan 2022 00:40
URI: http://repository.essex.ac.uk/id/eprint/3007

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