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

Ghiglino, C and Venditti, A (2007) Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies. [UNSPECIFIED]

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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: UNSPECIFIED
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 16 Jul 2012 20:24
Last Modified: 17 Aug 2017 18:10
URI: http://repository.essex.ac.uk/id/eprint/3007

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