diff --git a/.gitignore b/.gitignore index 76a59ec4..af347444 100644 --- a/.gitignore +++ b/.gitignore @@ -119,3 +119,6 @@ env-*/ # Cursor / SpecStory .cursor* .specstory*/ + +# Copyrighted material (do not commit) +source/ diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.ipynb b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.ipynb index 3ea16557..61ca568b 100644 --- a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.ipynb +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.ipynb @@ -1,187 +1,207 @@ { - "cells": [ - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "# Hubmer, Krusell, and Smith (Forthcoming)" - ] + "cells": [ + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "# Hubmer, Krusell, and Smith (2018)" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "# \"[A Comprehensive Quantitative Theory of the U.S. Wealth Distribution](https://economics.yale.edu/sites/default/files/files/pub/grad/working-papers/hubmerkrusellsmith_wealth2018.pdf)\"\n", + "\n", + "- Notebook created by Julien Acalin and Ruby Zheng\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### Summary\n", + "\n", + "This paper employs a benchmark heterogeneous-agent macroeconomic model to examine a number\n", + "of plausible drivers of the rise in wealth inequality in the U.S. over the last forty years. \n", + "\n", + "The main findings are as follows:\n", + "* The significant drop in tax progressivity starting in the late 1970s is the most important driver of the increase in wealth inequality since then \n", + "* The sharp observed increases in earnings inequality and the falling labor share over the recent decades fall far short of accounting for the data \n", + "* Returns on assets matter to account for the dynamics of wealth inequality over the period as portfolios of households differ systematically both across and within wealth groups\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### Overview \n", + "\n", + "### Prior literature\n", + "\n", + "The paper builds on three strands of work: \n", + "* (i) Bewley–Aiyagari models (Aiyagari 1994, Huggett 1993, Krusell & Smith 1998) show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. \n", + "* (ii) Introduce wealth-dependent returns: Benhabib, Bisin & Zhu (2015) show that capital income risk generates a Pareto tail; Cagetti & De Nardi (2006) model entrepreneurship and top wealth; Stachurski & Toda (2018) prove that in the standard setup (risk-free saving, constant discount factors) the wealth distribution cannot have a heavier tail than income, so such extensions are necessary. \n", + "* (iii) Empirical work documents long-run U.S. inequality (Piketty & Saez 2003, Saez & Zucman 2016) and motivates a comprehensive model that combines these ingredients to match the full distribution.\n", + "\n", + "#### A Bewley-Huggett-Aiyagari model\n", + "\n", + "This paper uses a macroeconomic general-equilibrium model with heterogeneous agents—the Bewley-Huggett-Aiyagari setting—to examine more closely a set of candidate explanations for the increase in U.S. wealth inequality over the last forty or so years. The method the authors follow is thus to: \n", + "* (i) independently measure changes in the environment, such as in the tax code, the earnings processes facing individuals, and their portfolio returns; \n", + "* (ii) feed these into the model assuming that the economy is in a steady state in 1967; \n", + "* (iii) examine the resulting wealth distribution path; and \n", + "* (iv) conduct counterfactuals.\n", + "\n", + "\n", + "#### Portfolio heterogeneity\n", + "\n", + "In this paper, the authors depart from the benchmark model by introducing portfolio heterogeneity across and within wealth groups. This is motivated by the fact that register data in Norway and Sweden (see Fagereng et al. (2015) and Bach et al. (2015)) have revealed, first, an average return that is increasing in the household’s overall level of wealth; and, second, an idiosyncratic return component (because different households hold different types of assets) whose variance is also increasing in wealth.\n", + "\n", + "One major finding is that, once portfolio heterogeneity, calibrated to the findings in Bach et al. (2015), is incorporated into the model, the authors replicate wealth inequality of the magnitude we see in the data. Given the role of portfolio heterogeneity and of asset-price movements, it is important to think more about the origins of these observations. This paper is an important step forward in noting just how important portfolios and asset prices are for inequality.\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### The model\n", + "\n", + "\n", + "#### Households\n", + "\n", + "Utility is given by:\n", + "$u(c)=\\frac{c^{1-\\gamma}}{1-\\gamma}$\n", + "\n", + "The objective function is:\n", + "$\\max _{\\left(c_{t}\\right)_{t=0}^{\\infty}}\\left\\{u\\left(c_{0}\\right)+\\mathbb{E}_{0}\\left[\\sum_{t=1}^{\\infty} \\prod_{s=0}^{t-1} \\beta_{s} u\\left(c_{t}\\right)\\right]\\right\\}$\n", + "\n", + "Labor supply is exogenous.\n", + "\n", + "Asset markets are incomplete, consumers cannot fully insure against idiosyncratic shocks. In the\n", + "model, the only endogenous choice is the overall level of savings $a_t$. The gross return on it is:\n", + "$1+\\underline{r}_{t}+r_{t}^{X}\\left(a_{t}\\right)+\\sigma^{X}\\left(a_{t}\\right) \\eta_{t}$\n", + "\n", + "where $\\underline{r}_{t}$ is an aggregate return component, $r_{t}^{X}$ and $\\sigma^{X}$ are functions that control mean and standard deviation of excess returns, and $η_t$ is an i.i.d. standard normal idiosyncratic shock. The excess return schedule should be viewed as the reduced form of an implicit portfolio choice model, where the optimal choice is allowed to depend on the overall wealth level, albeit not on other persistent state variables.\n", + "\n", + "\n", + "**The decision problem of the consumer can be stated in recursive form as follows:**\n", + "\n", + "$\\begin{aligned} V_{t}\\left(x_{t}, p_{t}, \\beta_{t}\\right) &=\\max _{a_{t+1} \\geq \\underline{a}}\\left\\{u\\left(x_{t}-a_{t+1}\\right)+\\beta_{t} \\mathbb{E}\\left[V_{t+1}\\left(x_{t+1}, p_{t+1}, \\beta_{t+1}\\right) | p_{t}, \\beta_{t}\\right]\\right\\} \\\\ \\text { subject to } \\\\ x_{t+1} &=a_{t+1}+y_{t+1}-\\tau_{t+1}\\left(y_{t+1}\\right)+\\left(1-\\tilde{\\tau}_{t+1}\\right) \\tilde{y}_{t+1}+T_{t+1} \\\\ y_{t+1} &=\\left(r_{t+1}+r_{t+1}^{X}\\left(a_{t+1}\\right)\\right) a_{t+1}+w_{t+1} l_{t+1}\\left(p_{t+1}, \\nu_{t+1}\\right) \\\\ \\tilde{y}_{t+1} &=\\sigma^{X}\\left(a_{t+1}\\right) \\eta_{t+1} a_{t+1} \\end{aligned}$\n", + "\n", + "\n", + "Given cash-on-hand $x_t$ (all resources available in period $t$), the optimal savings decision and the resulting value function depend solely on the persistent component of the earnings process $p_t$ and the current discount factor $β_t$. Conditional on $(p_t, β_t)$, the expectation is taken over $(p_{t+1}, β_{t+1})$ as well as the transitory shocks to earnings $ν_{t+1}$ and the return on capital $η_{t+1}$. Ordinary gross income $y_t$ is subject\n", + "to a non-linear income tax $τ_t(·)$, while there is a flat (capital gains) tax $\\tilde{τ}_t$ on the mean-zero idiosyncratic return component. Each consumer receives a uniform lump-sum transfer $T_t$.\n", + "\n", + "\n", + "\n", + "#### Firms\n", + "\n", + "Firms are perfectly competitive and can be described by an aggregate constant returns to scale production\n", + "function.\n", + "\n", + "\n", + "#### Government\n", + "\n", + "The government redistributes aggregate income by means of a uniform lump-sum payment, which\n", + "amounts to a constant fraction $λ ∈ [0, 1]$ of aggregate tax revenues. The remainder is spent in a way such\n", + "that marginal utilities of agents are not affected.\n", + "\n", + "\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### Results\n", + "\n", + "\n", + "#### Wealth inequality\n", + "\n", + "How much does each of the various sources of heterogeneity contribute to wealth inequality in the benchmark economy? To answer this question, the authors start from the benchmark model, shut down one channel at a time, and report on the general equilibrium differences in Table 2.\n", + "\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "
" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "Overall, discount factor heterogeneity does contribute positively to wealth inequality, but it is not the\n", + "most important factor. Instead, differences in returns are crucial. Line 7 shuts down return differences across wealth levels, line 8 return risk, while 6 combines the two modifications. Overall, differences in mean returns across wealth levels are far more important, though at the very top idiosyncratic return risk matters equally.\n", + "\n", + "A striking feature of Table 2 is the fundamental importance of tax progressivity in keeping wealth inequality in check. Line 5 refers to a counterfactual that replaces the progressive income tax with a flat tax, such that aggregate tax revenues relative to output are unchanged. Wealth inequality is exploding. For example, the top 1% share increases from 27.4% to 89.2%.\n", + "\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "\n", + "#### Dynamics\n", + "\n", + "Figure 9 displays the evolution of top wealth shares in the model (solid blue line) compared to the data as measured by Saez & Zucman (2016) using the capitalization method (SZ). In addition, whenever possible the graphs are augmented by survey estimates from the SCF (dashed yellow lines).\n", + "\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "
" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### Conclusion\n", + "\n", + "Declining tax progressivity, together with increasing earnings risk and higher earnings inequality amongst top earnings, can account for the rise in the capital-to-net-output ratio and at least some of the decline in the (gross) labor share when the elasticity of substitution between capital and labor is larger than one as in Karabarbounis & Neiman (2014b). This model thus provides an alternative to the central mechanism—declining growth rates—to which Piketty (2014) draws attention in attempting to connect these macroeconomic trends to rising inequality.\n", + "\n", + "Moreover, the key mechanism accounting for dynamics lies in heterogeneous portfolios across and within wealth groups, along with systematic return movements in the data." + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### Subsequent literature\n", + "\n", + "Work citing HKS (2018) has moved in three directions:\n", + "\n", + "* (i) Policy analysis: The same type of wealth heterogeneity is used to study how monetary policy and tax reform affect inequality—e.g. Lenza & Slačálek (2020, 2024) on monetary policy and inequality in the euro area, and Guner et al. (2021) on income tax reform in Spain. \n", + "* (ii) Empirical discipline: Micro evidence on saving and returns by wealth (e.g. Fagereng, Holm, Moll & Natvik 2019 on capital gains across the wealth distribution) is used to validate and refine the mechanisms that generate the right tail. \n", + "* (iii) New channels and theory: Markups and market power (Boar & Midrigan 2019), culture and portfolios (Fleck & Monninger 2020), and deeper theory for income-fluctuation problems and state-dependent discounting (Ma, Stachurski & Toda 2019; Stachurski & Zhang 2019) extend the framework. Together, this suggests the field is heading toward policy-relevant, empirically disciplined models that integrate multiple mechanisms." + ] + } + ], + "metadata": { + "kernelspec": { + "display_name": "Python 3 (ipykernel)", + "language": "python", + "name": "python3" + }, + "language_info": { + "codemirror_mode": { + "name": "ipython", + "version": 3 + }, + "file_extension": ".py", + "mimetype": "text/x-python", + "name": "python", + "nbconvert_exporter": "python", + "pygments_lexer": "ipython3", + "version": "3.11.7" + } }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "# \"[A Comprehensive Quantitative Theory of the U.S. Wealth Distribution](https://economics.yale.edu/sites/default/files/files/pub/grad/working-papers/hubmerkrusellsmith_wealth2018.pdf)\"\n", - "\n", - "- Notebook created by Julien Acalin \n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "### Summary\n", - "\n", - "This paper employs a benchmark heterogeneous-agent macroeconomic model to examine a number\n", - "of plausible drivers of the rise in wealth inequality in the U.S. over the last forty years. \n", - "\n", - "The main findings are as follows:\n", - "* The significant drop in tax progressivity starting in the late 1970s is the most important driver of the increase in wealth inequality since then \n", - "* The sharp observed increases in earnings inequality and the falling labor share over the recent decades fall far short of accounting for the data \n", - "* Returns on assets matter to account for the dynamics of wealth inequality over the period as portfolios of households differ systematically both across and within wealth groups\n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "### Overview \n", - "\n", - "#### A Bewley-Huggett-Aiyagari model\n", - "\n", - "This paper uses a macroeconomic general-equilibrium model with heterogeneous agents—the Bewley-Huggett-Aiyagari setting—to examine more closely a set of candidate explanations for the increase in U.S. wealth inequality over the last forty or so years. The method the authors follow is thus to: \n", - "* (i) independently measure changes in the environment, such as in the tax code, the earnings processes facing individuals, and their portfolio returns; \n", - "* (ii) feed these into the model assuming that the economy is in a steady state in 1967; \n", - "* (iii) examine the resulting wealth distribution path; and \n", - "* (iv) conduct counterfactuals.\n", - "\n", - "\n", - "#### Portfolio heterogeneity\n", - "\n", - "In this paper, the authors depart from the benchmark model by introducing portfolio heterogeneity across and within wealth groups. This is motivated by the fact that register data in Norway and Sweden (see Fagereng et al. (2015) and Bach et al. (2015)) have revealed, first, an average return that is increasing in the household’s overall level of wealth; and, second, an idiosyncratic return component (because different households hold different types of assets) whose variance is also increasing in wealth.\n", - "\n", - "One major finding is that, once portfolio heterogeneity, calibrated to the findings in Bach et al. (2015), is incorporated into the model, the authors replicate wealth inequality of the magnitude we see in the data. Given the role of portfolio heterogeneity and of asset-price movements, it is important to think more about the origins of these observations. This paper is an important step forward in noting just how important portfolios and asset prices are for inequality.\n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "### The model\n", - "\n", - "\n", - "#### Households\n", - "\n", - "Utility is given by:\n", - "$u(c)=\\frac{c^{1-\\gamma}}{1-\\gamma}$\n", - "\n", - "The objective function is:\n", - "$\\max _{\\left(c_{t}\\right)_{t=0}^{\\infty}}\\left\\{u\\left(c_{0}\\right)+\\mathbb{E}_{0}\\left[\\sum_{t=1}^{\\infty} \\prod_{s=0}^{t-1} \\beta_{s} u\\left(c_{t}\\right)\\right]\\right\\}$\n", - "\n", - "Labor supply is exogenous.\n", - "\n", - "Asset markets are incomplete, consumers cannot fully insure against idiosyncratic shocks. In the\n", - "model, the only endogenous choice is the overall level of savings $a_t$. The gross return on it is:\n", - "$1+\\underline{r}_{t}+r_{t}^{X}\\left(a_{t}\\right)+\\sigma^{X}\\left(a_{t}\\right) \\eta_{t}$\n", - "\n", - "where $\\underline{r}_{t}$ is an aggregate return component, $r_{t}^{X}$ and $\\sigma^{X}$ are functions that control mean and standard deviation of excess returns, and $η_t$ is an i.i.d. standard normal idiosyncratic shock. The excess return schedule should be viewed as the reduced form of an implicit portfolio choice model, where the optimal choice is allowed to depend on the overall wealth level, albeit not on other persistent state variables.\n", - "\n", - "\n", - "**The decision problem of the consumer can be stated in recursive form as follows:**\n", - "\n", - "$\\begin{aligned} V_{t}\\left(x_{t}, p_{t}, \\beta_{t}\\right) &=\\max _{a_{t+1} \\geq \\underline{a}}\\left\\{u\\left(x_{t}-a_{t+1}\\right)+\\beta_{t} \\mathbb{E}\\left[V_{t+1}\\left(x_{t+1}, p_{t+1}, \\beta_{t+1}\\right) | p_{t}, \\beta_{t}\\right]\\right\\} \\\\ \\text { subject to } \\\\ x_{t+1} &=a_{t+1}+y_{t+1}-\\tau_{t+1}\\left(y_{t+1}\\right)+\\left(1-\\tilde{\\tau}_{t+1}\\right) \\tilde{y}_{t+1}+T_{t+1} \\\\ y_{t+1} &=\\left(r_{t+1}+r_{t+1}^{X}\\left(a_{t+1}\\right)\\right) a_{t+1}+w_{t+1} l_{t+1}\\left(p_{t+1}, \\nu_{t+1}\\right) \\\\ \\tilde{y}_{t+1} &=\\sigma^{X}\\left(a_{t+1}\\right) \\eta_{t+1} a_{t+1} \\end{aligned}$\n", - "\n", - "\n", - "Given cash-on-hand $x_t$ (all resources available in period $t$), the optimal savings decision and the resulting value function depend solely on the persistent component of the earnings process $p_t$ and the current discount factor $β_t$. Conditional on $(p_t, β_t)$, the expectation is taken over $(p_{t+1}, β_{t+1})$ as well as the transitory shocks to earnings $ν_{t+1}$ and the return on capital $η_{t+1}$. Ordinary gross income $y_t$ is subject\n", - "to a non-linear income tax $τ_t(·)$, while there is a flat (capital gains) tax $\\tilde{τ}_t$ on the mean-zero idiosyncratic return component. Each consumer receives a uniform lump-sum transfer $T_t$.\n", - "\n", - "\n", - "\n", - "#### Firms\n", - "\n", - "Firms are perfectly competitive and can be described by an aggregate constant returns to scale production\n", - "function.\n", - "\n", - "\n", - "#### Government\n", - "\n", - "The government redistributes aggregate income by means of a uniform lump-sum payment, which\n", - "amounts to a constant fraction $λ ∈ [0, 1]$ of aggregate tax revenues. The remainder is spent in a way such\n", - "that marginal utilities of agents are not affected.\n", - "\n", - "\n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "### Results\n", - "\n", - "\n", - "#### Wealth inequality\n", - "\n", - "How much does each of the various sources of heterogeneity contribute to wealth inequality in the benchmark economy? To answer this question, the authors start from the benchmark model, shut down one channel at a time, and report on the general equilibrium differences in Table 2.\n", - "\n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "
" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "Overall, discount factor heterogeneity does contribute positively to wealth inequality, but it is not the\n", - "most important factor. Instead, differences in returns are crucial. Line 7 shuts down return differences across wealth levels, line 8 return risk, while 6 combines the two modifications. Overall, differences in mean returns across wealth levels are far more important, though at the very top idiosyncratic return risk matters equally.\n", - "\n", - "A striking feature of Table 2 is the fundamental importance of tax progressivity in keeping wealth inequality in check. Line 5 refers to a counterfactual that replaces the progressive income tax with a flat tax, such that aggregate tax revenues relative to output are unchanged. Wealth inequality is exploding. For example, the top 1% share increases from 27.4% to 89.2%.\n", - "\n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "\n", - "#### Dynamics\n", - "\n", - "Figure 9 displays the evolution of top wealth shares in the model (solid blue line) compared to the data as measured by Saez & Zucman (2016) using the capitalization method (SZ). In addition, whenever possible the graphs are augmented by survey estimates from the SCF (dashed yellow lines).\n", - "\n" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "
" - ] - }, - { - "cell_type": "markdown", - "metadata": {}, - "source": [ - "### Conclusion\n", - "\n", - "Declining tax progressivity, together with increasing earnings risk and higher earnings inequality amongst top earnings, can account for the rise in the capital-to-net-output ratio and at least some of the decline in the (gross) labor share when the elasticity of substitution between capital and labor is larger than one as in Karabarbounis & Neiman (2014b). This model thus provides an alternative to the central mechanism—declining growth rates—to which Piketty (2014) draws attention in attempting to connect these macroeconomic trends to rising inequality.\n", - "\n", - "Moreover, the key mechanism accounting for dynamics lies in heterogeneous portfolios across and within wealth groups, along with systematic return movements in the data." - ] - } - ], - "metadata": { - "kernelspec": { - "display_name": "Python 3", - "language": "python", - "name": "python3" - }, - "language_info": { - "codemirror_mode": { - "name": "ipython", - "version": 3 - }, - "file_extension": ".py", - "mimetype": "text/x-python", - "name": "python", - "nbconvert_exporter": "python", - "pygments_lexer": "ipython3", - "version": "3.6.8" - } - }, - "nbformat": 4, - "nbformat_minor": 2 + "nbformat": 4, + "nbformat_minor": 4 } diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.md new file mode 100644 index 00000000..0f792e54 --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/Acalin_HKS.md @@ -0,0 +1,156 @@ +--- +jupytext: + text_representation: + extension: .md + format_name: myst + format_version: 0.13 + jupytext_version: 1.19.1 +kernelspec: + display_name: Python 3 (ipykernel) + language: python + name: python3 +--- + +# Hubmer, Krusell, and Smith (2018) + ++++ + +# "[A Comprehensive Quantitative Theory of the U.S. Wealth Distribution](https://economics.yale.edu/sites/default/files/files/pub/grad/working-papers/hubmerkrusellsmith_wealth2018.pdf)" + +- Notebook created by Julien Acalin and Ruby Zheng + ++++ + +### Summary + +This paper employs a benchmark heterogeneous-agent macroeconomic model to examine a number +of plausible drivers of the rise in wealth inequality in the U.S. over the last forty years. + +The main findings are as follows: +* The significant drop in tax progressivity starting in the late 1970s is the most important driver of the increase in wealth inequality since then +* The sharp observed increases in earnings inequality and the falling labor share over the recent decades fall far short of accounting for the data +* Returns on assets matter to account for the dynamics of wealth inequality over the period as portfolios of households differ systematically both across and within wealth groups + ++++ + +### Overview + +### Prior literature + +The paper builds on three strands of work: +* (i) Bewley–Aiyagari models (Aiyagari 1994, Huggett 1993, Krusell & Smith 1998) show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. +* (ii) Introduce wealth-dependent returns: Benhabib, Bisin & Zhu (2015) show that capital income risk generates a Pareto tail; Cagetti & De Nardi (2006) model entrepreneurship and top wealth; Stachurski & Toda (2018) prove that in the standard setup (risk-free saving, constant discount factors) the wealth distribution cannot have a heavier tail than income, so such extensions are necessary. +* (iii) Empirical work documents long-run U.S. inequality (Piketty & Saez 2003, Saez & Zucman 2016) and motivates a comprehensive model that combines these ingredients to match the full distribution. + +#### A Bewley-Huggett-Aiyagari model + +This paper uses a macroeconomic general-equilibrium model with heterogeneous agents—the Bewley-Huggett-Aiyagari setting—to examine more closely a set of candidate explanations for the increase in U.S. wealth inequality over the last forty or so years. The method the authors follow is thus to: +* (i) independently measure changes in the environment, such as in the tax code, the earnings processes facing individuals, and their portfolio returns; +* (ii) feed these into the model assuming that the economy is in a steady state in 1967; +* (iii) examine the resulting wealth distribution path; and +* (iv) conduct counterfactuals. + + +#### Portfolio heterogeneity + +In this paper, the authors depart from the benchmark model by introducing portfolio heterogeneity across and within wealth groups. This is motivated by the fact that register data in Norway and Sweden (see Fagereng et al. (2015) and Bach et al. (2015)) have revealed, first, an average return that is increasing in the household’s overall level of wealth; and, second, an idiosyncratic return component (because different households hold different types of assets) whose variance is also increasing in wealth. + +One major finding is that, once portfolio heterogeneity, calibrated to the findings in Bach et al. (2015), is incorporated into the model, the authors replicate wealth inequality of the magnitude we see in the data. Given the role of portfolio heterogeneity and of asset-price movements, it is important to think more about the origins of these observations. This paper is an important step forward in noting just how important portfolios and asset prices are for inequality. + ++++ + +### The model + + +#### Households + +Utility is given by: +$u(c)=\frac{c^{1-\gamma}}{1-\gamma}$ + +The objective function is: +$\max _{\left(c_{t}\right)_{t=0}^{\infty}}\left\{u\left(c_{0}\right)+\mathbb{E}_{0}\left[\sum_{t=1}^{\infty} \prod_{s=0}^{t-1} \beta_{s} u\left(c_{t}\right)\right]\right\}$ + +Labor supply is exogenous. + +Asset markets are incomplete, consumers cannot fully insure against idiosyncratic shocks. In the +model, the only endogenous choice is the overall level of savings $a_t$. The gross return on it is: +$1+\underline{r}_{t}+r_{t}^{X}\left(a_{t}\right)+\sigma^{X}\left(a_{t}\right) \eta_{t}$ + +where $\underline{r}_{t}$ is an aggregate return component, $r_{t}^{X}$ and $\sigma^{X}$ are functions that control mean and standard deviation of excess returns, and $η_t$ is an i.i.d. standard normal idiosyncratic shock. The excess return schedule should be viewed as the reduced form of an implicit portfolio choice model, where the optimal choice is allowed to depend on the overall wealth level, albeit not on other persistent state variables. + + +**The decision problem of the consumer can be stated in recursive form as follows:** + +$\begin{aligned} V_{t}\left(x_{t}, p_{t}, \beta_{t}\right) &=\max _{a_{t+1} \geq \underline{a}}\left\{u\left(x_{t}-a_{t+1}\right)+\beta_{t} \mathbb{E}\left[V_{t+1}\left(x_{t+1}, p_{t+1}, \beta_{t+1}\right) | p_{t}, \beta_{t}\right]\right\} \\ \text { subject to } \\ x_{t+1} &=a_{t+1}+y_{t+1}-\tau_{t+1}\left(y_{t+1}\right)+\left(1-\tilde{\tau}_{t+1}\right) \tilde{y}_{t+1}+T_{t+1} \\ y_{t+1} &=\left(r_{t+1}+r_{t+1}^{X}\left(a_{t+1}\right)\right) a_{t+1}+w_{t+1} l_{t+1}\left(p_{t+1}, \nu_{t+1}\right) \\ \tilde{y}_{t+1} &=\sigma^{X}\left(a_{t+1}\right) \eta_{t+1} a_{t+1} \end{aligned}$ + + +Given cash-on-hand $x_t$ (all resources available in period $t$), the optimal savings decision and the resulting value function depend solely on the persistent component of the earnings process $p_t$ and the current discount factor $β_t$. Conditional on $(p_t, β_t)$, the expectation is taken over $(p_{t+1}, β_{t+1})$ as well as the transitory shocks to earnings $ν_{t+1}$ and the return on capital $η_{t+1}$. Ordinary gross income $y_t$ is subject +to a non-linear income tax $τ_t(·)$, while there is a flat (capital gains) tax $\tilde{τ}_t$ on the mean-zero idiosyncratic return component. Each consumer receives a uniform lump-sum transfer $T_t$. + + + +#### Firms + +Firms are perfectly competitive and can be described by an aggregate constant returns to scale production +function. + + +#### Government + +The government redistributes aggregate income by means of a uniform lump-sum payment, which +amounts to a constant fraction $λ ∈ [0, 1]$ of aggregate tax revenues. The remainder is spent in a way such +that marginal utilities of agents are not affected. + + + ++++ + +### Results + + +#### Wealth inequality + +How much does each of the various sources of heterogeneity contribute to wealth inequality in the benchmark economy? To answer this question, the authors start from the benchmark model, shut down one channel at a time, and report on the general equilibrium differences in Table 2. + + ++++ + +
+ ++++ + +Overall, discount factor heterogeneity does contribute positively to wealth inequality, but it is not the +most important factor. Instead, differences in returns are crucial. Line 7 shuts down return differences across wealth levels, line 8 return risk, while 6 combines the two modifications. Overall, differences in mean returns across wealth levels are far more important, though at the very top idiosyncratic return risk matters equally. + +A striking feature of Table 2 is the fundamental importance of tax progressivity in keeping wealth inequality in check. Line 5 refers to a counterfactual that replaces the progressive income tax with a flat tax, such that aggregate tax revenues relative to output are unchanged. Wealth inequality is exploding. For example, the top 1% share increases from 27.4% to 89.2%. + + ++++ + + +#### Dynamics + +Figure 9 displays the evolution of top wealth shares in the model (solid blue line) compared to the data as measured by Saez & Zucman (2016) using the capitalization method (SZ). In addition, whenever possible the graphs are augmented by survey estimates from the SCF (dashed yellow lines). + + ++++ + +
+ ++++ + +### Conclusion + +Declining tax progressivity, together with increasing earnings risk and higher earnings inequality amongst top earnings, can account for the rise in the capital-to-net-output ratio and at least some of the decline in the (gross) labor share when the elasticity of substitution between capital and labor is larger than one as in Karabarbounis & Neiman (2014b). This model thus provides an alternative to the central mechanism—declining growth rates—to which Piketty (2014) draws attention in attempting to connect these macroeconomic trends to rising inequality. + +Moreover, the key mechanism accounting for dynamics lies in heterogeneous portfolios across and within wealth groups, along with systematic return movements in the data. + ++++ + +### Subsequent literature + +Work citing HKS (2018) has moved in three directions: + +* (i) Policy analysis: The same type of wealth heterogeneity is used to study how monetary policy and tax reform affect inequality—e.g. Lenza & Slačálek (2020, 2024) on monetary policy and inequality in the euro area, and Guner et al. (2021) on income tax reform in Spain. +* (ii) Empirical discipline: Micro evidence on saving and returns by wealth (e.g. Fagereng, Holm, Moll & Natvik 2019 on capital gains across the wealth distribution) is used to validate and refine the mechanisms that generate the right tail. +* (iii) New channels and theory: Markups and market power (Boar & Midrigan 2019), culture and portfolios (Fleck & Monninger 2020), and deeper theory for income-fluctuation problems and state-dependent discounting (Ma, Stachurski & Toda 2019; Stachurski & Zhang 2019) extend the framework. Together, this suggests the field is heading toward policy-relevant, empirically disciplined models that integrate multiple mechanisms. diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKS.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKS.bib new file mode 100644 index 00000000..4396c8cb --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKS.bib @@ -0,0 +1,1359 @@ +@ARTICLE{Toda2019-kd, + title = "Wealth distribution with random discount factors", + author = "Toda, Alexis Akira", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 104, + pages = "101--113", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{Stiglitz1969-hx, + title = "Distribution of income and wealth among individuals", + author = "Stiglitz, J E", + journal = "Econometrica", + publisher = "JSTOR", + volume = 37, + number = 3, + pages = 382, + month = aug, + year = 1969 +} + +@ARTICLE{BewleyUnknown-yy, + title = "Interest Bearing Money Equilibrium Stock Capital", + author = "Bewley, T", + journal = "Manuscript" +} + +@ARTICLE{Quadrini2000-yd, + title = "Entrepreneurship, saving, and social mobility", + author = "Quadrini, Vincenzo", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 3, + number = 1, + pages = "1--40", + month = jan, + year = 2000, + language = "en" +} + +@BOOK{Carroll2012-uy, + title = "Theoretical Foundations Buffer Stock Saving", + author = "Carroll, C D", + year = 2012 +} + +@ARTICLE{Unknown2016-bh, + title = "Office Tax Analysis: Taxes Paid Capital Gains Returns Positive Net + Capital Gains", + pages = "1954--2014", + year = 2016 +} + + +@ARTICLE{Krusell2009-jt, + title = "Revisiting the welfare effects of eliminating business cycles", + author = "Krusell, Per and Mukoyama, Toshihiko and Şahin, Ayşegül and + Smith, Jr, Anthony A", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 12, + number = 3, + pages = "393--404", + abstract = "We investigate the welfare effects of eliminating business cycles + in a model with substantial consumer heterogeneity. The + heterogeneity arises from uninsurable and idiosyncratic + uncertainty in preferences and employment status. We calibrate + the model to match the distribution of wealth in U.S. data and + features of transitions between employment and unemployment. In + comparison with much of the literature, we find rather large + effects. For our benchmark model, we find welfare effects that, + on average across all consumers, are of a bit more than one order + of magnitude larger than those computed by Lucas [Lucas Jr., + R.E., 1987. Models of Business Cycles. Basil Blackwell, New + York]. When we distinguish long- from short-term unemployment, + long-term unemployment being distinguished by poor (and highly + procyclical) employment prospects and low unemployment + compensation, the average gain from eliminating cycles is as much + as 1\% in consumption equivalents. In addition, in both models, + there are large differences across groups: very poor consumers + gain a lot when cycles are removed (the long-term unemployed as + much as around 30\%), as do very rich consumers, whereas the + majority of consumers—the “middle class”—sees much smaller gains + from removing cycles. Inequality also rises substantially upon + removing cycles.", + month = jul, + year = 2009, + language = "en" +} + +@INCOLLECTION{Piketty2015-mp, + title = "Wealth and inheritance in the Long Run", + author = "Piketty, Thomas and Zucman, Gabriel", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1303--1368", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Krusell2015-ml, + title = "Piketty's Second Law Capitalism Fundamental?", + author = "Krusell, P", + journal = "Journal Political Economy", + volume = 123, + number = 4, + pages = "725--748", + year = 2015 +} + +@ARTICLE{Kesten1973-qv, + title = "Random difference equations and Renewal theory for products of + random matrices", + author = "Kesten, Harry", + journal = "Acta Math.", + publisher = "International Press of Boston", + volume = 131, + number = 0, + pages = "207--248", + year = 1973, + language = "en" +} + +@ARTICLE{Kennickell2017-fa, + title = "Tossed and turned: Wealth dynamics of {U}.{S}. households + 2007-2009", + author = "Kennickell, Arthur B", + journal = "Stat. J. IAOS", + publisher = "SAGE Publications", + volume = 33, + number = 1, + pages = "175--183", + month = mar, + year = 2017 +} + +@ARTICLE{Katz1992-yc, + title = "Changes in relative wages, 1963-1987: Supply and demand factors", + author = "Katz, L F and Murphy, K M", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 107, + number = 1, + pages = "35--78", + month = feb, + year = 1992 +} + +@BOOK{Karabarbounis2014-xe, + title = "Capital Depreciation Labor Shares Around World: Measurement + Implications", + author = "Karabarbounis, L and Neiman, B", + year = 2014 +} + +@ARTICLE{Gagnon2014-ko, + title = "Piketty, {T}. (2014), capital in the twenty-first century + (translated by Arthur Goldhammer), the Belknap press of Harvard + university press, Cambridge, mass. 685 p", + author = "Gagnon, Jean-Marie", + journal = "Actual. Econ.", + publisher = "Consortium Erudit", + volume = 90, + number = 4, + pages = 329, + year = 2014 +} + +@INCOLLECTION{Piazzesi2016-no, + title = "Housing and macroeconomics", + author = "Piazzesi, M and Schneider, M", + booktitle = "Handbook of Macroeconomics", + publisher = "Elsevier", + pages = "1547--1640", + series = "Handbook of Macroeconomics", + year = 2016, + language = "en" +} + +@ARTICLE{Carroll1996-bk, + title = "On the concavity of the consumption function", + author = "Carroll, Christopher D and Kimball, Miles S", + journal = "Econometrica", + publisher = "JSTOR", + volume = 64, + number = 4, + pages = 981, + month = jul, + year = 1996 +} + +@BOOK{Guerrieri2011-cv, + title = "Credit Crises, Precautionary Savings, Liquidity Trap. {NBER} Working + Paper 17583", + author = "Guerrieri, V and Lorenzoni, G", + year = 2011 +} + +@ARTICLE{Piketty1997-dn, + title = "The dynamics of the wealth distribution and the interest rate + with credit rationing", + author = "Piketty, Thomas", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 64, + number = 2, + pages = 173, + abstract = "With decreasing returns and first-best credit, the long-run + interest rate and aggregate output are uniquely determined, and + wealth dispersion among individuals or firms is irrelevant. + Introducing credit rationing into the Solow model modifies these + conclusions. Multiple stationary interest rates and wealth + distributions can exist because higher initial rates can be + self-reinforcing through higher credit rationing and lower + capital accumulation. The wealth accumulation process is ergodic + in every steady state, but wealth mobility is lower with higher + steady-state interest rates. Aggregate output is higher in steady + states with lower interest rates because credit is better + allocated. Short-run interest rate or distribution shocks can be + self-sustaining and can have long-run effects on output through + the induced dynamics of the wealth distribution and credit + rationing.", + month = apr, + year = 1997 +} + +@ARTICLE{Carroll2006-om, + title = "The method of endogenous gridpoints for solving dynamic + stochastic optimization problems", + author = "Carroll, Christopher D", + journal = "Econ. Lett.", + publisher = "Elsevier BV", + volume = 91, + number = 3, + pages = "312--320", + abstract = "This paper introduces a solution method for numerical dynamic + stochastic optimization problems that avoids rootfinding + operations. The idea is applicable to many microeconomic and + macroeconomic problems, including life cycle, buffer-stock, and + stochastic growth problems. Software is provided.", + month = jun, + year = 2006, + language = "en" +} + +@ARTICLE{Cagetti2009-wg, + title = "Estate taxation, entrepreneurship, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 99, + number = 1, + pages = "85--111", + abstract = "This paper studies the estate tax in a quantitative framework + with business investment, borrowing constraints, estate + transmission, and wealth inequality. We find that the estate tax + has little effect on the saving and investment decisions of small + businesses, but does distort the decisions of larger firms, + thereby reducing aggregate output and savings. Removing such + distortions by eliminating the estate tax does not necessarily + imply that everyone would be better off. If other taxes were + raised to reestablish fiscal balance, those at the top of the + wealth distribution would experience a large welfare gain, but + most of the population would lose. (JEL D31, E21, H2)", + month = feb, + year = 2009, + language = "en" +} + +@ARTICLE{Hubmer2018-dt, + title = "A comprehensive quantitative theory of the {U} . s . wealth + distribution", + author = "Hubmer, Joachim and Krusell, Per and Smith, Anthony A", + year = 2018, + language = "en" +} + +@BOOK{Benhabib2015-rk, + title = "Wealth Distribution Social Mobility {US}: Quantitative Approach. + {NBER} Working Paper", + author = "Benhabib, J and {Bisin} and Luo, M", + year = 2015 +} + +@ARTICLE{Aoki2017-nc, + title = "Zipf's law, Pareto's law, and the evolution of top incomes in the + United States", + author = "Aoki, Shuhei and Nirei, Makoto", + journal = "Am. Econ. J. Macroecon.", + publisher = "American Economic Association", + volume = 9, + number = 3, + pages = "36--71", + abstract = "We construct a tractable neoclassical growth model that generates + Pareto's law of income distribution and Zipf's law of the firm + size distribution from idiosyncratic, firm-level productivity + shocks. Executives and entrepreneurs invest in risk-free assets, + as well as their own firms' risky stocks, through which their + wealth and income depend on firm-level shocks. By using the + model, we evaluate how changes in tax rates can account for the + evolution of top incomes in the United States. The model matches + the decline in the Pareto exponent of the income distribution and + the trend of the top 1 percent income share in recent decades. + (JEL D31, H24, L11)", + month = jul, + year = 2017, + language = "en" +} + +@ARTICLE{Nirei2016-ya, + title = "Pareto distribution of income in neoclassical growth models", + author = "Nirei, Makoto and Aoki, Shuhei", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 20, + pages = "25--42", + abstract = "We construct a neoclassical growth model with heterogeneous + households that accounts for the Pareto distributions of income + and wealth in the upper tail. In an otherwise standard Bewley + model, we feature households' business productivity risks and + borrowing constraints, which we find generate the Pareto + distributions. Households with low productivity rely on wages and + returns from safe assets, while high productivity households + choose not to diversify their business risks. The model can + quantitatively account for the observed income distribution in + the U.S. under reasonable calibrations. Furthermore, we conduct + several comparative statics to examine how changes in parameters + affect the Pareto distributions. In particular, we find that the + change in the top tax rates in the 1980s potentially accounts for + much of the observed increase in top income dispersion in the + last decades. Our analytical result provides a coherent + interpretation for the numerical comparative statics.", + month = apr, + year = 2016, + language = "en" +} + +@ARTICLE{Kartashova2014-ca, + title = "Private equity premium puzzle revisited", + author = "Kartashova, Katya", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 104, + number = 10, + pages = "3297--3334", + abstract = "This paper revisits the results of Moskowitz and + Vissing-Jørgensen (2002) on returns to entrepreneurial + investments in the United States. Following the authors' + methodology and new data from the Survey of Consumer Finances, I + find that the “private equity premium puzzle” does not survive + the period of high public equity returns in the 1990s. The + difference between private and public equity returns is positive + and large period-by-period between 1999 and 2007. Whereas in the + 2008–2010 period, overlapping with the Great Recession, public + and private equities performances are substantially closer. I + validate these results in the aggregate data going back to the + 1960s. (JEL G11, G12, L26)", + month = oct, + year = 2014, + language = "en" +} + +@ARTICLE{Benhabib2017-af, + title = "Earnings inequality and other determinants of wealth inequality", + author = "Benhabib, Jess and Bisin, Alberto and Luo, Mi", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 107, + number = 5, + pages = "593--597", + abstract = "We study the relation between the distribution of labor earnings + and the distribution of wealth. We show, theoretically as well as + empirically, that while labor earnings and precautionary savings + are important determinants of wealth inequality factors, they + cannot by themselves account for the thick tail of (the large top + shares in) the observed distribution of wealth. Other + determinants, like stochastic returns to wealth, as well as + savings rates and rates of returns increasing in wealth, need to + be accounted for.", + month = may, + year = 2017, + language = "en" +} + +@ARTICLE{Benhabib2015-ed, + title = "The wealth distribution in Bewley economies with capital income + risk", + author = "Benhabib, Jess and Bisin, Alberto and Zhu, Shenghao", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 159, + pages = "489--515", + abstract = "We study the wealth distribution in Bewley economies with + idiosyncratic capital income risk. We show analytically that + under rather general conditions on the stochastic structure of + the economy, a unique ergodic distribution of wealth displays a + fat tail.", + month = sep, + year = 2015, + language = "en" +} + +@ARTICLE{McKay2016-qy, + title = "The power of forward guidance revisited", + author = "McKay, Alisdair and Nakamura, Emi and Steinsson, Jón", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 106, + number = 10, + pages = "3133--3158", + abstract = "In recent years, central banks have increasingly turned to + forward guidance as a central tool of monetary policy. Standard + monetary models imply that far future forward guidance has huge + effects on current outcomes, and these effects grow with the + horizon of the forward guidance. We present a model in which the + power of forward guidance is highly sensitive to the assumption + of complete markets. When agents face uninsurable income risk and + borrowing constraints, a precautionary savings effect tempers + their responses to changes in future interest rates. As a + consequence, forward guidance has substantially less power to + stimulate the economy. (JEL E21, E40, E50)", + month = oct, + year = 2016, + language = "en" +} + +@ARTICLE{Campbell2001-ir, + title = "Have individual stocks become more volatile? An empirical + exploration of idiosyncratic risk", + author = "Campbell, John Y and Lettau, Martin and Malkiel, Burton G and Xu, + Yexiao", + journal = "J. Finance", + publisher = "Wiley", + volume = 56, + number = 1, + pages = "1--43", + abstract = "ABSTRACTThis paper uses a disaggregated approach to study the + volatility of common stocks at the market, industry, and firm + levels. Over the period from 1962 to 1997 there has been a + noticeable increase in firm‐level volatility relative to market + volatility. Accordingly, correlations among individual stocks and + the explanatory power of the market model for a typical stock + have declined, whereas the number of stocks needed to achieve a + given level of diversification has increased. All the volatility + measures move together countercyclically and help to predict GDP + growth. Market volatility tends to lead the other volatility + series. Factors that may be responsible for these findings are + suggested.", + month = feb, + year = 2001, + language = "en" +} + +@ARTICLE{Toda2014-py, + title = "Incomplete market dynamics and cross-sectional distributions", + author = "Toda, Alexis Akira", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 154, + pages = "310--348", + abstract = "The size distributions of many economic variables seem to obey + the double power law, that is, the power law holds in both the + upper and the lower tails. I explain this emergence of the double + power law—which has important economic, econometric, and social + implications—using a tractable dynamic stochastic general + equilibrium model with heterogeneous agents subject to aggregate + and idiosyncratic investment risks. I establish theoretical + properties such as existence, uniqueness, and constrained + efficiency of equilibrium, and provide a numerical algorithm that + is guaranteed to converge. The model is widely applicable: it + allows for arbitrary homothetic CRRA recursive preferences, an + arbitrary Markov process governing aggregate shocks, and an + arbitrary number of technologies and assets with arbitrary + portfolio constraints.", + month = nov, + year = 2014, + language = "en" +} + +@ARTICLE{Benhabib2011-hf, + title = "Distribution wealth fiscal policy economies finitely lived agents", + author = "Benhabib, J and {Bisin} and Zhu, S", + journal = "Econometrica", + volume = 79, + number = 1, + pages = "123--157", + year = 2011 +} + +@ARTICLE{Becker1980-pk, + title = "On the Long-Run steady state in a simple dynamic model of + equilibrium with heterogeneous households", + author = "Becker, Robert A", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 95, + number = 2, + pages = 375, + month = sep, + year = 1980 +} + +@ARTICLE{Bach2015-gh, + title = "Rich pickings? Risk, return, and skill in the portfolios of the + wealthy", + author = "Bach, Laurent and Calvet, Laurent E and Sodini, Paolo", + journal = "SSRN Electron. J.", + publisher = "Elsevier BV", + abstract = "This paper empirically investigates the portfolios of wealthy + households and their implications for the dynamics of inequality. + Using an administrative panel of all Swedish residents, we + document that returns on financial wealth are on average 4\% + higher per year for households in the top 1\% compared to the + median household. These high average returns are primarily + compensations for high levels of systematic risk. Abnormal + risk-adjusted returns, linked for instance to informational + advantages or exceptional investment skill, contribute only + marginally to the high returns of the wealthy. Implications for + inequality dynamics and public policy are discussed.", + year = 2015, + language = "en" +} + +@ARTICLE{Chatterjee1994-ch, + title = "Transitional dynamics and the distribution of wealth in a + neoclassical growth model", + author = "Chatterjee, Satyajit", + journal = "J. Public Econ.", + publisher = "Elsevier BV", + volume = 54, + number = 1, + pages = "97--119", + abstract = "The evolution of the personal distribution of wealth in a + standard neoclassical growth model is studied. If the economy is + growing toward the steady state and preferences are such that + marginal utility from consumption is infinite (finite) at some + (all) positive (non-negative) consumption level(s), then the + average saving propensity of agents is positively (negatively) + related to their wealth. If the economy is decaying toward the + steady state, these relationships are reversed. If wealth and + average saving propensity are positively (negatively) related, + the distribution of current period wealth Lorenz-dominates (is + Lorenz-dominated by) next period's distribution of wealth.", + month = may, + year = 1994, + language = "en" +} + +@ARTICLE{Piketty1995-ml, + title = "Social Mobility and Redistributive Politics", + author = "Piketty, T", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 110, + number = 3, + pages = "551--584", + abstract = "Just like economists, voters have conflicting views about + redistributive taxation because they estimate its incentive costs + differently. We model rational agents as trying to learn from + their dynastic income mobility experience the relative importance + of effort and predetermined factors in the generation of income + inequality and therefore the magnitude of these incentive costs. + In the long run, ``left-wing dynasties'' believing less in + individual effort and voting for more redistribution coexist with + ``right-wing dynasties.'' This allows us to explain why + individual mobility experience and not only current income + matters for political attiitudes and how persistent differences + in perceptions about social mobility can generate persistent + differences in redistribution across countries.", + month = aug, + year = 1995 +} + +@ARTICLE{Gabaix2009-kn, + title = "Power laws in economics and finance", + author = "Gabaix, Xavier", + journal = "Annu. Rev. Econom.", + publisher = "Annual Reviews", + volume = 1, + number = 1, + pages = "255--294", + abstract = "A power law (PL) is the form taken by a large number of + surprising empirical regularities in economics and finance. This + review surveys well-documented empirical PLs regarding income and + wealth, the size of cities and firms, stock market returns, + trading volume, international trade, and executive pay. It + reviews detail-independent theoretical motivations that make + sharp predictions concerning the existence and coefficients of + PLs, without requiring delicate tuning of model parameters. These + theoretical mechanisms include random growth, optimization, and + the economics of superstars, coupled with extreme value theory. + Some empirical regularities currently lack an appropriate + explanation. This article highlights these open areas for future + research.", + month = sep, + year = 2009, + language = "en" +} + +@ARTICLE{Heathcote2010-bj, + title = "The macroeconomic implications of rising wage inequality in the + United States", + author = "Heathcote, Jonathan and Storesletten, Kjetil and Violante, + Giovanni L", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 118, + number = 4, + pages = "681--722", + abstract = "In recent decades, American workers have faced a rising college + premium, a narrowing gender gap, and increasing wage volatility. + This paper explores the quantitative and welfare implications of + these changes. The framework is an incomplete-markets life cycle + model in which individuals choose education, intrafamily time + allocation, and savings. Given the observed history of the U.S. + wage structure, the model replicates key trends in + cross-sectional inequality in hours worked, earnings, and + consumption. Recent cohorts enjoy welfare gains, on average, as + higher relative wages for college graduates and for women + translate into higher educational attainment and a more even + division of labor within the household.", + month = aug, + year = 2010, + language = "en" +} + +@ARTICLE{Mehra1985-rw, + title = "The equity premium: A puzzle", + author = "Mehra, Rajnish and Prescott, Edward C", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 15, + number = 2, + pages = "145--161", + abstract = "Restrictions that a class of general equilibrium models place + upon the average returns of equity and Treasury bills are found + to be strongly violated by the U.S. data in the 1889–1978 period. + This result is robust to model specification and measurement + problems. We conclude that, most likely, an equilibrium model + which is not an Arrow-Debreu economy will be the one that + simultaneously rationalizes both historically observed large + average equity return and the small average risk-free return.", + month = mar, + year = 1985, + language = "en" +} + +@ARTICLE{Acemoglu2002-ry, + title = "Technical change, inequality, and the labor market", + author = "Acemoglu, Daron", + journal = "J. Econ. Lit.", + publisher = "American Economic Association", + volume = 40, + number = 1, + pages = "7--72", + abstract = "This essay discusses the effect of technical change on wage + inequality. I argue that the behavior of wages and returns to + schooling indicates that technical change has been skill-biased + during the past sixty years. Furthermore, the recent increase in + inequality is most likely due to an acceleration in skill bias. + In contrast to twentieth century developments, most technical + change during the nineteenth century appears to be + skill-replacing. I suggest that this is because the increased + supply of unskilled workers in the English cities made the + introduction of these technologies profitable. On the other hand, + the twentieth-century has been characterized by skill-biased + technical change because the rapid increase in the supply of + skilled workers has induced the development of + skill-complementary technologies. The recent acceleration in + skill bias is in turn likely to have been a response to the + acceleration in the supply of skills during the past several + decades.", + month = mar, + year = 2002 +} + +@ARTICLE{Kaymak2016-wg, + title = "The evolution of wealth inequality over half a century: The role + of taxes, transfers and technology", + author = "Kaymak, Barış and Poschke, Markus", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "1--25", + abstract = "Over the last 50 years the U.S. tax system went through a + striking transformation that reduced the effective tax rates for + top income groups and raised transfers to seniors. This paper + investigates the macroeconomic repercussions of this change in + policy, particularly for the distributions of income, wealth and + consumption. Changes in taxes and transfers account for nearly + half of the rise in wealth concentration. Nonetheless, their + impact on the distributions of income and consumption has been + minor due to changes in equilibrium prices and the offsetting + effects of tax cuts and transfers on the dispersion of + consumption. Results highlight the role of increasing wage + dispersion during this period as the main driver of trends in + inequality.", + month = feb, + year = 2016, + language = "en" +} + +@ARTICLE{Auclert2019-jm, + title = "Monetary policy and the redistribution channel", + author = "Auclert, Adrien", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 109, + number = 6, + pages = "2333--2367", + abstract = "This paper evaluates the role of redistribution in the + transmission mechanism of monetary policy to consumption. Three + channels affect aggregate spending when winners and losers have + different marginal propensities to consume: an earnings + heterogeneity channel from unequal income gains, a Fisher channel + from unexpected inflation, and an interest rate exposure channel + from real interest rate changes. Sufficient statistics from + Italian and US data suggest that all three channels are likely to + amplify the effects of monetary policy. (JEL E21, E31, E43, E52)", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{GabaixUnknown-mc, + title = "The Dynamics of Inequality", + author = "Gabaix, Xavier and Lasry, Jean-Michel and Lions, Pierre-Louis and + Moll, Benjamin", + abstract = "The past forty years have seen a rapid rise in top income + inequality in the United States. While there is a large number of + existing theories of the Pareto tail of the long-run income + distributions, almost none of these address the fast rise in top + inequality observed in the data. We show that standard theories, + which build on a random growth mechanism, generate transition + dynamics that are an order of magnitude too slow relative to those + observed in the data. We then suggest two parsimonious deviations + from the canonical model that can explain such changes: ``scale + dependence'' that may arise from changes in skill prices, and + ``type dependence,'' i.e. the presence of some ``high-growth + types.'' These deviations are consistent with theories in which + the increase in top income inequality is driven by the rise of + ``superstar'' entrepreneurs or managers." +} + +@ARTICLE{Stachurski2018-pa, + title = "An impossibility theorem for wealth in heterogeneous-agent + models with limited heterogeneity", + author = "Stachurski, John and Toda, Alexis Akira", + journal = "arXiv [econ.GN]", + abstract = "It has been conjectured that canonical + Bewley--Huggett--Aiyagari heterogeneous-agent models cannot + explain the joint distribution of income and wealth. The + results stated below verify this conjecture and clarify its + implications under very general conditions. We show in + particular that if (i) agents are infinitely-lived, (ii) + saving is risk-free, and (iii) agents have constant discount + factors, then the wealth distribution inherits the tail + behavior of income shocks (e.g., light-tailedness or the + Pareto exponent). Our restrictions on utility require only + that relative risk aversion is bounded, and a large variety + of income processes are admitted. Our results show + conclusively that it is necessary to go beyond standard + models to explain the empirical fact that wealth is + heavier-tailed than income. We demonstrate through examples + that relaxing any of the above three conditions can generate + Pareto tails.", + month = jul, + year = 2018, + archivePrefix = "arXiv", + primaryClass = "econ.GN" +} + +@ARTICLE{Aiyagari1994-ka, + title = "Uninsured idiosyncratic risk and aggregate saving", + author = "Aiyagari, S R", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 109, + number = 3, + pages = "659--684", + abstract = "We present a qualitative and quantitative analysis of the + standard growth model modified to include precautionary saving + motives and liquidity constraints. We address the impact on the + aggregate saving rate, the importance of asset trading to + individuals, and the relative inequality of wealth and income + distributions.", + month = aug, + year = 1994, + language = "en" +} + +@ARTICLE{Castaneda2003-ow, + title = "Accounting for the {U}.s. earnings and wealth inequality", + author = "Castañeda, Ana and Díaz‐Giménez, Javier and Ríos‐Rull, + José‐víctor", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 4, + pages = "818--857", + abstract = "We show that a theory of earnings and wealth inequality, based on + the optimal choices of ex ante identical households that face + uninsured idiosyncratic shocks to their endowments of efficiency + labor units, accounts for the U.S. earnings and wealth inequality + almost exactly.", + month = aug, + year = 2003, + language = "en" +} + +@ARTICLE{Piketty2003-zj, + title = "Income Inequality in France, {1901–1998}", + author = "Piketty, Thomas", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 5, + pages = "1004--1042", + abstract = "The objective of this research is to document and to explain + trends in inequality in 20th century France. Data from income tax + returns (1915-98), wage tax returns (1919-98) and inheritance tax + returns (1902-94), is used in order to compute fully homogeneous, + yearly estimates of income inequality, wage inequality and wealth + inequality. The main conclusion is that the decline in income + inequality that took place during the first half of the 20th + century was mostly accidental. In France and possibly in a number + of other developed countries as well wage inequality has actually + been extremely stable in the long run, and the secular decline in + income inequality is for the most part a capital income + phenomenon. Holders of very large fortunes were severely hit by + major shocks during the 1914-45 period, and were never able to + fully recover from these shocks, probably because of the dynamic + effects of progressive taxation on capital accumulation and + pre-tax income inequality.", + month = oct, + year = 2003 +} + +@ARTICLE{Huggett1993-af, + title = "The risk-free rate in heterogeneous-agent incomplete-insurance + economies", + author = "Huggett, Mark", + journal = "J. Econ. Dyn. Control", + publisher = "Elsevier BV", + volume = 17, + number = "5-6", + pages = "953--969", + abstract = "Why has the average real risk-free interest rate been less than + one percent? The question is motivated by the failure of a class + of calibrated representative-agent economies to explain the + average return to equity and risk-free debt. I construct an + economy where agents experience uninsurable idiosyncratic + endowment shocks and smooth consumption by holding a risk-free + asset. I calibrate the economy and characterize equilibria + computationally. With a borrowing constraint of one year's + income, the resulting risk-free rate is more than one percent + below the rate in the comparable representative-agent economy.", + month = sep, + year = 1993, + language = "en" +} + +@ARTICLE{Cagetti2006-sz, + title = "Entrepreneurship, frictions, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 114, + number = 5, + pages = "835--870", + abstract = "This paper constructs and calibrates a parsimonious model of + occupational choice that allows for entrepreneurial entry, exit, + and investment decisions in the presence of borrowing + constraints. The model fits very well a number of empirical + observations, including the observed wealth distribution for + entrepreneurs and workers. At the aggregate level, more + restrictive borrowing constraints generate less wealth + concentration and reduce average firm size, aggregate capital, + and the fraction of entrepreneurs. Voluntary bequests allow some + high-ability workers to establish or enlarge an entrepreneurial + activity. With accidental bequests only, there would be fewer + very large firms and less aggregate capital and wealth + concentration.", + month = oct, + year = 2006, + language = "en" +} + +@ARTICLE{Krusell1998-cr, + title = "Income and wealth heterogeneity in the macroeconomy", + author = "Krusell, Per and Smith, Jr, Anthony A", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 106, + number = 5, + pages = "867--896", + abstract = "How do movements in the distribution of income and wealth affect + the macroeconomy? We analyze this question theoretically, using + numerical methods, in the context of a calibrated version of the + stochastic growth model with partially uninsurable idiosyncratic + risk and movements in aggregate productivity.", + month = oct, + year = 1998 +} + +@ARTICLE{Karabarbounis2014-el, + title = "The global decline of the labor share", + author = "Karabarbounis, Loukas and Neiman, Brent", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 129, + number = 1, + pages = "61--103", + abstract = "AbstractThe stability of the labor share of income is a key + foundation in macroeconomic models. We document, however, that + the global labor share has significantly declined since the early + 1980s, with the decline occurring within the large majority of + countries and industries. We show that the decrease in the + relative price of investment goods, often attributed to advances + in information technology and the computer age, induced firms to + shift away from labor and toward capital. The lower price of + investment goods explains roughly half of the observed decline in + the labor share, even when we allow for other mechanisms + influencing factor shares, such as increasing profits, + capital-augmenting technology growth, and the changing skill + composition of the labor force. We highlight the implications of + this explanation for welfare and macroeconomic dynamics.", + month = feb, + year = 2014, + language = "en" +} + +@INCOLLECTION{Krusell2013-tv, + title = "Quantitative macroeconomic models with heterogeneous agents", + author = "Krusell, Per and Smith, Jr, Anthony A", + editor = "Blundell, Richard and Newey, Whitney K and Persson, Torsten", + booktitle = "Advances in Economics and Econometrics", + publisher = "Cambridge University Press", + address = "Cambridge", + pages = "298--340", + year = 2013 +} + +@ARTICLE{Bricker2015-lk, + title = "Measuring income and wealth at the top using administrative and + survey data", + author = "Bricker, Jesse and Henriques, Alice and Krimmel, Jacob and + Sabelhaus, John", + journal = "SSRN Electron. J.", + publisher = "Elsevier BV", + volume = 2016, + number = 1, + pages = "261--331", + abstract = "Administrative tax data indicate that U.S. top income and wealth + shares are substantial and increasing rapidly (Piketty and Saez + 2003, Saez and Zucman 2014). A key reason for using + administrative data to measure top shares is to overcome the + under-representation of families at the very top that plagues + most household surveys. However, using tax records alone + restricts the unit of analysis for measuring economic resources, + limits the concepts of income and wealth being measured, and + imposes a rigid correlation between income and wealth. The Survey + of Consumer Finances (SCF) solves the under-representation + problem by combining administrative and survey data (Bricker et + al, 2014). Administrative records are used to select the SCF + sample and verify that high-end families are appropriately + represented, and the survey is designed to measure comprehensive + concepts of income and wealth at the family level. The SCF shows + high and rising top income and wealth shares, as in the ad + ministrative tax data. However, unadjusted, the levels and growth + based on administrative tax data alone appear to be substantially + larger. By constraining the SCF to be conceptually comparable, we + reconcile the differences, and show the extent to which + restrictions and rigidities needed to estimate top income and + wealth shares in the administrative data bias up levels and + growth rates.", + year = 2015 +} + +@ARTICLE{Fagereng2020-vt, + title = "Heterogeneity and persistence in returns to wealth", + author = "Fagereng, Andreas and Guiso, Luigi and Malacrino, Davide and + Pistaferri, Luigi", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 88, + number = 1, + pages = "115--170", + abstract = "We provide a systematic analysis of the properties of individual + returns to wealth using 12 years of population data from Norway's + administrative tax records. We document a number of novel + results. First, individuals earn markedly different average + returns on their net worth (a standard deviation of 22.1\%) and + on its components. Second, heterogeneity in returns does not + arise merely from differences in the allocation of wealth between + safe and risky assets: returns are heterogeneous even within + narrow asset classes. Third, returns are positively correlated + with wealth: moving from the 10th to the 90th percentile of the + net worth distribution increases the return by 18 percentage + points (and 10 percentage points if looking at net‐of‐tax + returns). Fourth, individual wealth returns exhibit substantial + persistence over time. We argue that while this persistence + partly arises from stable differences in risk exposure and assets + scale, it also reflects heterogeneity in sophistication and + financial information, as well as entrepreneurial talent. + Finally, wealth returns are correlated across generations. We + discuss the implications of these findings for several strands of + the wealth inequality debate.", + year = 2020, + language = "en" +} + +@ARTICLE{Kopczuk2015-zp, + title = "What do we know about the evolution of top wealth shares in the + United States?", + author = "Kopczuk, Wojciech", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 29, + number = 1, + pages = "47--66", + abstract = "I discuss available evidence about the evolution of top wealth + shares in the United States over the course of the 20th century. + The three main approaches—the Survey of Consumer Finances, estate + tax multiplier, and capitalization methods—generate generally + consistent findings until mid-1980s but diverge since then, with + the capitalization method showing a dramatic increase in wealth + concentration and the other two methods showing at best a small + increase. I discuss strengths and weaknesses of different + approaches. The increase in capitalization estimates since 2000 + is driven by a dramatic and puzzling increase in fixed income + assets. There is evidence that estate tax estimates may not be + sufficiently accounting for mortality improvements over time. The + nonresponse and coverage issues in the SCF are a concern. I + conclude that the changing nature of top incomes and the + increased importance of self-made wealth may explain difficulties + in implementing each of the methods and why the results diverge.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Kaplan2018-sr, + title = "Monetary policy according to {HANK}", + author = "Kaplan, Greg and Moll, Benjamin and Violante, Giovanni L", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 108, + number = 3, + pages = "697--743", + abstract = "We revisit the transmission mechanism from monetary policy to + household consumption in a Heterogeneous Agent New Keynesian + (HANK) model. The model yields empirically realistic + distributions of wealth and marginal propensities to consume + because of two features: uninsurable income shocks and multiple + assets with different degrees of liquidity and different returns. + In this environment, the indirect effects of an unexpected cut in + interest rates, which operate through a general equilibrium + increase in labor demand, far outweigh direct effects such as + intertemporal substitution. This finding is in stark contrast to + small- and medium-scale Representative Agent New Keynesian (RANK) + economies, where the substitution channel drives virtually all of + the transmission from interest rates to consumption. Failure of + Ricardian equivalence implies that, in HANK models, the fiscal + reaction to the monetary expansion is a key determinant of the + overall size of the macroeconomic response. (JEL D31, E12, E21, + E24, E43, E52, E62)", + month = mar, + year = 2018, + language = "en" +} + +@ARTICLE{Saez2016-zm, + title = "Wealth inequality in the United States since 1913: Evidence from + capitalized income tax data", + author = "Saez, Emmanuel and Zucman, Gabriel", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 131, + number = 2, + pages = "519--578", + abstract = "AbstractThis paper combines income tax returns with macroeconomic + household balance sheets to estimate the distribution of wealth + in the United States since 1913. We estimate wealth by + capitalizing the incomes reported by individual taxpayers, + accounting for assets that do not generate taxable income. We + successfully test our capitalization method in three micro + datasets where we can observe both income and wealth: the Survey + of Consumer Finance, linked estate and income tax returns, and + foundations’ tax records. We find that wealth concentration was + high in the beginning of the twentieth century, fell from 1929 to + 1978, and has continuously increased since then. The top 0.1\% + wealth share has risen from 7\% in 1978 to 22\% in 2012, a level + almost as high as in 1929. Top wealth-holders are younger today + than in the 1960s and earn a higher fraction of the economy’s + labor income. The bottom 90\% wealth share first increased up to + the mid-1980s and then steadily declined. The increase in wealth + inequality in recent decades is due to the upsurge of top incomes + combined with an increase in saving rate inequality. We explain + how our findings can be reconciled with Survey of Consumer + Finances and estate tax data.", + month = may, + year = 2016, + language = "en" +} + +@ARTICLE{Piketty2007-fo, + title = "How progressive is the {U}.s. federal tax system? A historical + and international perspective", + author = "Piketty, Thomas and Saez, Emmanuel", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 21, + number = 1, + pages = "3--24", + abstract = "This paper provides estimates of federal tax rates by income + groups in the United States since 1960, with special emphasis on + very top income groups. We include individual and corporate + income taxes, payroll taxes, and estate and gift taxes. The + progressivity of the U.S. federal tax system at the top of the + income distribution has declined dramatically since the 1960s. + This dramatic drop in progressivity is due primarily to a drop in + corporate taxes and in estate and gift taxes combined with a + sharp change in the composition of top incomes away from capital + income and toward labor income. The sharp drop in statutory top + marginal individual income tax rates has contributed only + moderately to the decline in tax progressivity. International + comparisons confirm that is it critical to take into account + other taxes than the individual income tax to properly assess the + extent of overall tax progressivity, both for time trends and for + cross-country comparisons. The pattern for the United Kingdom is + similar to the U.S. pattern. France had less progressive taxes + than the United States or the United Kingdom in 1970 but has + experienced an increase in tax progressivity and has now a more + progressive tax system than the United States or the United + Kingdom.", + month = jan, + year = 2007, + language = "en" +} + +@ARTICLE{Brinca2016-fs, + title = "Fiscal multipliers in the {21st} century", + author = "Brinca, Pedro and Holter, Hans A and Krusell, Per and Malafry, + Laurence", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "53--69", + abstract = "Fiscal multipliers appear to vary greatly over time and space. + Based on VARs for a large number of countries, we document a + strong correlation between wealth inequality and the magnitude of + fiscal multipliers. In an attempt to account for this finding, we + develop a life-cycle, overlapping-generations economy with + uninsurable labor market risk. We calibrate our model to match + key characteristics of a number of OECD economies, including the + distribution of wages and wealth, social security, taxes, and + government debt and study how a fiscal multiplier depends on + various country characteristics. We find that the fiscal + multiplier is highly sensitive to the fraction of the population + who face binding credit constraints and also to the average + wealth level in the economy. These findings together help us + generate a cross-country pattern of multipliers that is quite + similar to that in the data.", + month = feb, + year = 2016, + language = "en" +} + +@INCOLLECTION{Quadrini2015-bp, + title = "Inequality in Macroeconomics", + author = "Quadrini, Vincenzo and Ríos-Rull, José-Víctor", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1229--1302", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Piketty2003-xn, + title = "Income inequality in the United States, 1913-1998", + author = "Piketty, T and Saez, E", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 118, + number = 1, + pages = "1--41", + month = feb, + year = 2003, + language = "en" +} + +@ARTICLE{McKay2016-rr, + title = "The role of automatic stabilizers in the {U}.s. business cycle", + author = "McKay, Alisdair and Reis, Ricardo", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 84, + number = 1, + pages = "141--194", + abstract = "Most countries have automatic rules in their tax-and-transfer + systems that are partly intended to stabilize economic + fluctuations. This paper measures how effective they are. We put + forward a model that merges the standard incomplete-markets model + of consumption and inequality with the new Keynesian model of + nominal rigidities and business cycles, and that includes most of + the main potential stabilizers in the U.S. data, as well as the + theoretical channels by which they may work. We find that the + conventional argument that stabilizing disposable income will + stabilize aggregate demand plays a negligible role on the + effectiveness of the stabilizers, whereas tax-and-transfer + programs that affect inequality and social insurance can have a + large effect on aggregate volatility. However, as currently + designed, the set of stabilizers in place in the United States + has barely had any effect on volatility. According to our model, + expanding safety-net programs, like food stamps, has the largest + potential to enhance the effectiveness of the stabilizers.", + year = 2016, + language = "en" +} + +@ARTICLE{Kopczuk2004-bb, + title = "Top wealth shares in the United States, {1916–2000}: Evidence + from estate tax returns", + author = "Kopczuk, Wojciech and Saez, Emmanuel", + journal = "Natl. Tax J.", + publisher = "University of Chicago Press", + volume = 57, + number = "2.2", + pages = "445--487", + month = jun, + year = 2004, + language = "en" +} + +@ARTICLE{Jorda2017-jd, + title = "The rate of return on everything, {1870–2015}", + author = "Jorda, Oscar and {Federal Reserve Bank of San Francisco} and + Knoll, Katharina and Kuvshinov, Dmitry and Schularick, Moritz and + Taylor, Alan M and {Deutsche Bundesbank} and {University of Bonn} + and {University of Bonn} and {University of Bonn}", + journal = "Federal Reserve Bank of San Francisco, Working Paper Series", + publisher = "Federal Reserve Bank of San Francisco", + pages = "01--123", + abstract = "What is the aggregate real rate of return in the economy? Is it + higher than the growth rate of the economy and, if so, by how + much? Is there a tendency for returns to fall in the long-run? + Which particular assets have the highest long-run returns? We + answer these questions on the basis of a new and comprehensive + dataset for all major asset classes, including housing. The + annual data on total returns for equity, housing, bonds, and + bills cover 16 advanced economies from 1870 to 2015, and our new + evidence reveals many new findings and puzzles.", + month = dec, + year = 2017 +} + +@INCOLLECTION{Hornstein2005-td, + title = "The effects of technical change on labor market inequalities", + author = "Hornstein, Andreas and Krusell, Per and Violante, Giovanni L", + booktitle = "Handbook of Economic Growth", + publisher = "Elsevier", + pages = "1275--1370", + year = 2005 +} + +@ARTICLE{Heathcote2005-ls, + title = "Fiscal policy with heterogeneous agents and incomplete markets", + author = "Heathcote, Jonathan", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 72, + number = 1, + pages = "161--188", + abstract = "I undertake a quantitative investigation into the short run + effects of changes in the timing of taxes for a model economy in + which heterogeneous households trade only one asset and face a + borrowing constraint. This asset market structure implies that + the consumption of low wealth households is sensitive to tax + changes. The main finding of the paper is that when the wealth + distribution in the model resembles that in the United States, + market incompleteness accounts for large immediate aggregate + consumption increases following tax cuts, and large consumption + falls following tax increases. When taxes are lump-sum, for + example, a dollar change in tax revenue is associated with a 15 + cent change in aggregate consumption, compared to a response of + roughly one third this size when markets are complete but + households are finitely-lived. I find the response to tax changes + to be larger if the interest rate is constant rather than + determined endogenously, and smaller if taxes are proportional + rather than lump-sum.", + month = jan, + year = 2005, + language = "en" +} + +@ARTICLE{Cronqvist2015-lq, + title = "The origins of savings behavior", + author = "Cronqvist, Henrik and Siegel, Stephan", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 123, + number = 1, + pages = "123--169", + abstract = "What are the origins of individual savings behavior? Using data + on identical and fraternal twins matched with data on their + savings behavior, we find that an individual's savings propensity + is governed by both genetic predispositions, social transmission + from parents to their children, and gene-environment interplay + where certain environments moderate genetic influences. Genetic + variation explains about 35 percent of the variation in savings + rates across individuals, and this genetic effect is stronger in + less constraining, high socioeconomic status environments. + Parent-child transmission influences savings for young + individuals and those who grew up in a family environment with + less competition for parental resources. Individual-specific life + experiences is a very important explanation for behavior in the + savings domain, and strongest in urban communities. In a world + progressing rapidly towards individual retirement savings + autonomy, understanding the origins of individuals' savings + behavior are of key importance to economists as well as policy + makers.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Campanale2007-fn, + title = "Increasing returns to savings and wealth inequality", + author = "Campanale, Claudio", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 10, + number = 4, + pages = "646--675", + abstract = "In this paper I present an explanation to the fact that in the + data wealth is substantially more concentrated than income. + Starting from the observation that the composition of households' + portfolios changes towards a larger share of high-yield assets as + the level of net worth increases, I first use data on historical + asset returns and portfolio composition by wealth level to + construct an empirical return function. I then augment an + Overlapping Generation version of the standard neoclassical + growth model with idiosyncratic labor income risk and missing + insurance markets to allow for returns on savings to be + increasing in the level of accumulated assets. The quantitative + properties of the model are examined and show that an empirically + plausible difference between the return faced by poor and wealthy + agents is able to generate a substantial increase in wealth + inequality compared to the basic model, enough to match the Gini + index and all but the top 1 percentile of the US distribution of + wealth.", + month = oct, + year = 2007, + language = "en" +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_intro.ipynb b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_intro.ipynb new file mode 100644 index 00000000..bf7aef8c --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_intro.ipynb @@ -0,0 +1,55 @@ +{ + "cells": [ + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "**Paper:** [A Comprehensive Quantitative Theory of the U.S. Wealth Distribution](https://doi.org/10.1086/712332), Joachim Hubmer, Per Krusell, and Anthony A. Smith, Jr., 2018 (working paper); published in *NBER Macroeconomics Annual* 35 (2021). DOI: [10.1086/712332](https://doi.org/10.1086/712332)." + ], + "id": "e8aa588c" + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "**Original ballpark authors:** Julien Acalin — April 2019" + ], + "id": "16d067e9" + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "**Note:** `HKSWealthDistribution_summary.ipynb` is a copy you made — it has no git history of its own. Look at the original notebook (e.g. `Acalin_HKS.ipynb`, the one you copied from). For author information, run `git log --follow` on the original file or check the folder’s commit history on GitHub." + ], + "id": "5addd579" + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "**Updated by:** Ruby Zheng — February 16, 2026" + ], + "id": "84ee623e" + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [], + "id": "73a72401" + } + ], + "metadata": { + "kernelspec": { + "display_name": "Python 3 (ipykernel)", + "language": "python", + "name": "python3" + }, + "language_info": { + "name": "python", + "version": "3.11.0" + } + }, + "nbformat": 4, + "nbformat_minor": 5 +} \ No newline at end of file diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_prior-literature.ipynb b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_prior-literature.ipynb new file mode 100644 index 00000000..8f239bde --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_prior-literature.ipynb @@ -0,0 +1,66 @@ +{ + "cells": [ + { + "cell_type": "markdown", + "id": "d316dffd", + "metadata": {}, + "source": [ + "\n", + "# Prior literature\n", + "\n", + "**{cite:t}`Hubmer2018-dt`** — *NBER Macroeconomics Annual* 35 (2021). [DOI: 10.1086/712332](https://doi.org/10.1086/712332)\n" + ] + }, + { + "cell_type": "markdown", + "id": "7e04cdd4", + "metadata": {}, + "source": [ + "## Overview of the prior literature\n", + "\n", + "This literature can be summarized in three parts. First, standard incomplete-markets models in the Bewley–Aiyagari tradition ({cite:p}`Aiyagari1994-ka`; {cite:p}`Krusell1998-cr`) show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. Second, later studies extend these models by introducing return risk, entrepreneurship, and wealth-dependent returns ({cite:p}`Stachurski2018-pa`; {cite:p}`Benhabib2015-ed`; {cite:p}`Cagetti2006-sz`), which help generate fat-tailed wealth distributions consistent with theory. Third, empirical work documents long-run U.S. wealth and income inequality ({cite:p}`Piketty2003-xn`; {cite:p}`Saez2016-zm`) and provides quantitative methods, motivating a comprehensive model that combines heterogeneity, risk, and return differences.\n" + ] + }, + { + "cell_type": "markdown", + "id": "4babf0de", + "metadata": {}, + "source": [ + "## Key foundational papers and their contributions\n", + "\n", + "- **{cite:t}`Aiyagari1994-ka`** “Uninsured idiosyncratic risk and aggregate saving”: Establishes the standard incomplete-markets model with precautionary saving and borrowing constraints that serves as the baseline framework.\n", + "\n", + "- **{cite:t}`Krusell1998-cr`** “Income and wealth heterogeneity in the macroeconomy”: Develops the main quantitative method for solving heterogeneous-agent models with aggregate dynamics.\n", + "\n", + "- **{cite:t}`Stachurski2018-pa`** “An impossibility theorem for wealth in heterogeneous-agent models with limited heterogeneity”: Proves that standard Bewley–Aiyagari models (infinite-lived agents, risk-free saving, constant discount factors) cannot generate a heavier tail for wealth than for income. This forces the kind of extensions (return risk, entrepreneurship, etc.) that {cite:t}`Hubmer2018-dt` use.\n", + "\n", + "- **{cite:t}`Benhabib2015-ed`** “The wealth distribution in Bewley economies with capital income risk”: Shows that introducing idiosyncratic capital income risk generates a Pareto-tailed wealth distribution.\n", + "\n", + "- **{cite:t}`Cagetti2006-sz`** “Entrepreneurship, frictions, and wealth”: Provides a foundational model of entrepreneurship and borrowing constraints that explains top wealth concentration.\n", + "\n", + "- **{cite:t}`Piketty2003-xn`** “Income inequality in the United States, 1913–1998”: Documents long-run trends in top income shares in the United States.\n", + "\n", + "- **{cite:t}`Saez2016-zm`** “Wealth inequality in the United States since 1913”: Constructs comprehensive long-run data on U.S. wealth inequality that serves as the main empirical benchmark.\n" + ] + }, + { + "cell_type": "markdown", + "id": "eb5ebebd", + "metadata": {}, + "source": [] + } + ], + "metadata": { + "kernelspec": { + "display_name": "Python 3 (ipykernel)", + "language": "python", + "name": "python3" + }, + "language_info": { + "name": "python", + "version": "3.11.0" + } + }, + "nbformat": 4, + "nbformat_minor": 5 +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_subsequent-literature.ipynb b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_subsequent-literature.ipynb new file mode 100644 index 00000000..bb5c1cbf --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_subsequent-literature.ipynb @@ -0,0 +1,54 @@ +{ + "cells": [ + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "# Subsequent literature\n", + "\n", + "**{cite:t}`Hubmer2018-dt`** — *NBER Macroeconomics Annual* 35 (2021). [DOI: 10.1086/712332](https://doi.org/10.1086/712332)\n" + ] + }, + { + "cell_type": "markdown", + "id": "c11e7811", + "metadata": {}, + "source": [ + "## Overview of how the paper has been built upon\n", + "\n", + "A search in LitMaps identified 14 papers that cite {cite:t}`Hubmer2018-dt`; references are in `subsequent-literature.bib` in this folder.\n", + "\n", + "The subsequent literature shows that ideas of the model used in {cite:t}`Hubmer2018-dt` are increasingly used for policy analysis, especially to study how monetary and fiscal policies affect different parts of the wealth distribution, rather than only matching inequality patterns. At the same time, new empirical and theoretical work strengthens these models by disciplining saving and return behavior with micro data and by providing deeper foundations for income risk and discount-factor heterogeneity. More recent studies also introduce new channels such as market power and beliefs, suggesting that future research needs to integrate multiple mechanisms to better explain changes in wealth inequality.\n", + "\n", + "Work citing {cite:t}`Hubmer2018-dt` has moved in three directions: **(i) Policy analysis** — the same type of wealth heterogeneity is used to study how monetary policy and tax reform affect inequality (e.g. {cite:p}`monetary_lenza_2020`; {cite:p}`monetary_lenza_2024` on the euro area; {cite:p}`reforming_guner_2021` on income tax reform in Spain). **(ii) Empirical discipline** — micro evidence on saving and returns by wealth (e.g. {cite:p}`saving_fagereng_2019`) is used to validate and refine the mechanisms that generate the right tail. **(iii) New channels and theory** — markups and market power ({cite:p}`markups_boar_2019`), culture and portfolios ({cite:p}`culture_fleck_2020`), and deeper theory for income-fluctuation problems and state-dependent discounting ({cite:p}`income_ma_2019`; {cite:p}`dynamic_stachurski_2019`) extend the framework. Together, the field is heading toward policy-relevant, empirically disciplined models that integrate multiple mechanisms.\n" + ] + }, + { + "cell_type": "markdown", + "id": "c6bbe8c3", + "metadata": {}, + "source": [ + "## Key subsequent papers and their contributions\n", + "\n", + "1. **{cite:t}`saving_fagereng_2019`** “Saving Behavior Across the Wealth Distribution: The Importance of Capital Gains”: Puts empirical structure on saving and returns by wealth. Critical for validating and refining the mechanisms that generate the right tail in {cite:t}`Hubmer2018-dt`.\n", + "\n", + "2. **{cite:t}`markups_boar_2019`** “Markups and Inequality”: Shifts the focus from individual saving and income to how market power and product market structure shape inequality, broadening the agenda to firm- and market-driven sources of wealth concentration.\n", + "\n", + "3. **{cite:t}`income_ma_2019`** “The income fluctuation problem and the evolution of wealth” (JET): Provides a theoretical link from the income fluctuation problem to the evolution and shape of the wealth distribution. Clarifies when and how {cite:t}`Hubmer2018-dt`-style dynamics arise from first principles.\n" + ] + } + ], + "metadata": { + "kernelspec": { + "display_name": "Python 3 (ipykernel)", + "language": "python", + "name": "python3" + }, + "language_info": { + "name": "python", + "version": "3.11.0" + } + }, + "nbformat": 4, + "nbformat_minor": 5 +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_summary.ipynb b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_summary.ipynb new file mode 100644 index 00000000..b624192a --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/HKSWealthDistribution_summary.ipynb @@ -0,0 +1,187 @@ +{ + "cells": [ + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "# **[A Comprehensive Quantitative Theory of the U.S. Wealth Distribution](https://economics.yale.edu/sites/default/files/files/pub/grad/working-papers/hubmerkrusellsmith_wealth2018.pdf)** \n", + "\n", + "{cite:t}`Hubmer2018-dt`\n", + "\n", + "- Notebook created by Julien Acalin and Ruby Zheng\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "## Summary\n", + "\n", + "This paper employs a benchmark heterogeneous-agent macroeconomic model to examine a number\n", + "of plausible drivers of the rise in wealth inequality in the U.S. over the last forty years. \n", + "\n", + "The main findings are as follows:\n", + "* The significant drop in tax progressivity starting in the late 1970s is the most important driver of the increase in wealth inequality since then \n", + "* The sharp observed increases in earnings inequality and the falling labor share over the recent decades fall far short of accounting for the data \n", + "* Returns on assets matter to account for the dynamics of wealth inequality over the period as portfolios of households differ systematically both across and within wealth groups\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "## Overview \n", + "\n", + "### Prior literature\n", + "\n", + "The paper builds on three strands of work: \n", + "* (i) Bewley–Aiyagari models ({cite:p}`Aiyagari1994-ka`; {cite:p}`Huggett1993-af`; {cite:p}`Krusell1998-cr`) show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. \n", + "* (ii) Introduce wealth-dependent returns: {cite:t}`Benhabib2015-ed` show that capital income risk generates a Pareto tail; {cite:t}`Cagetti2006-sz` model entrepreneurship and top wealth; {cite:t}`Stachurski2018-pa` prove that in the standard setup (risk-free saving, constant discount factors) the wealth distribution cannot have a heavier tail than income, so such extensions are necessary. \n", + "* (iii) Empirical work documents long-run U.S. inequality ({cite:p}`Piketty2003-xn`, {cite:p}`Saez2016-zm`) and motivates a comprehensive model that combines these ingredients to match the full distribution.\n", + "\n", + "### A Bewley-Huggett-Aiyagari model\n", + "\n", + "This paper uses a macroeconomic general-equilibrium model with heterogeneous agents—the Bewley-Huggett-Aiyagari setting—to examine more closely a set of candidate explanations for the increase in U.S. wealth inequality over the last forty or so years. The method the authors follow is thus to: \n", + "* (i) independently measure changes in the environment, such as in the tax code, the earnings processes facing individuals, and their portfolio returns; \n", + "* (ii) feed these into the model assuming that the economy is in a steady state in 1967; \n", + "* (iii) examine the resulting wealth distribution path; and \n", + "* (iv) conduct counterfactuals.\n", + "\n", + "\n", + "### Portfolio heterogeneity\n", + "\n", + "In this paper, the authors depart from the benchmark model by introducing portfolio heterogeneity across and within wealth groups. This is motivated by the fact that register data in Norway and Sweden (see Fagereng et al. (2015) and {cite:p}`Bach2015-gh`) have revealed, first, an average return that is increasing in the household’s overall level of wealth; and, second, an idiosyncratic return component (because different households hold different types of assets) whose variance is also increasing in wealth.\n", + "\n", + "One major finding is that, once portfolio heterogeneity, calibrated to the findings in {cite:p}`Bach2015-gh`, is incorporated into the model, the authors replicate wealth inequality of the magnitude we see in the data. Given the role of portfolio heterogeneity and of asset-price movements, it is important to think more about the origins of these observations. This paper is an important step forward in noting just how important portfolios and asset prices are for inequality.\n", + "\n", + "For a detailed discussion of the foundational literature, see the [Prior Literature](HKSWealthDistribution_prior-literature.ipynb) notebook.\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "## The model\n", + "\n", + "\n", + "### Households\n", + "\n", + "Utility is given by:\n", + "$u(c)=\\frac{c^{1-\\gamma}}{1-\\gamma}$\n", + "\n", + "The objective function is:\n", + "$\\max _{\\left(c_{t}\\right)_{t=0}^{\\infty}}\\left\\{u\\left(c_{0}\\right)+\\mathbb{E}_{0}\\left[\\sum_{t=1}^{\\infty} \\prod_{s=0}^{t-1} \\beta_{s} u\\left(c_{t}\\right)\\right]\\right\\}$\n", + "\n", + "Labor supply is exogenous.\n", + "\n", + "Asset markets are incomplete; consumers cannot fully insure against idiosyncratic shocks. In the\n", + "model, the only endogenous choice is the overall level of savings $a_t$. The gross return on it is:\n", + "$1+\\underline{r}_{t}+r_{t}^{X}\\left(a_{t}\\right)+\\sigma^{X}\\left(a_{t}\\right) \\eta_{t}$\n", + "\n", + "where $\\underline{r}_{t}$ is an aggregate return component, $r_{t}^{X}$ and $\\sigma^{X}$ are functions that control mean and standard deviation of excess returns, and $η_t$ is an i.i.d. standard normal idiosyncratic shock. The excess return schedule should be viewed as the reduced form of an implicit portfolio choice model, where the optimal choice is allowed to depend on the overall wealth level, albeit not on other persistent state variables.\n", + "\n", + "\n", + "**The decision problem of the consumer can be stated in recursive form as follows:**\n", + "\n", + "$\\begin{aligned} V_{t}\\left(x_{t}, p_{t}, \\beta_{t}\\right) &=\\max _{a_{t+1} \\geq \\underline{a}}\\left\\{u\\left(x_{t}-a_{t+1}\\right)+\\beta_{t} \\mathbb{E}\\left[V_{t+1}\\left(x_{t+1}, p_{t+1}, \\beta_{t+1}\\right) | p_{t}, \\beta_{t}\\right]\\right\\} \\\\ \\text { subject to } \\\\ x_{t+1} &=a_{t+1}+y_{t+1}-\\tau_{t+1}\\left(y_{t+1}\\right)+\\left(1-\\tilde{\\tau}_{t+1}\\right) \\tilde{y}_{t+1}+T_{t+1} \\\\ y_{t+1} &=\\left(r_{t+1}+r_{t+1}^{X}\\left(a_{t+1}\\right)\\right) a_{t+1}+w_{t+1} l_{t+1}\\left(p_{t+1}, \\nu_{t+1}\\right) \\\\ \\tilde{y}_{t+1} &=\\sigma^{X}\\left(a_{t+1}\\right) \\eta_{t+1} a_{t+1} \\end{aligned}$\n", + "\n", + "\n", + "Given cash-on-hand $x_t$ (all resources available in period $t$), the optimal savings decision and the resulting value function depend solely on the persistent component of the earnings process $p_t$ and the current discount factor $β_t$. Conditional on $(p_t, β_t)$, the expectation is taken over $(p_{t+1}, β_{t+1})$ as well as the transitory shocks to earnings $ν_{t+1}$ and the return on capital $η_{t+1}$. Ordinary gross income $y_t$ is subject\n", + "to a non-linear income tax $τ_t(·)$, while there is a flat (capital gains) tax $\\tilde{τ}_t$ on the mean-zero idiosyncratic return component. Each consumer receives a uniform lump-sum transfer $T_t$.\n", + "\n", + "\n", + "\n", + "### Firms\n", + "\n", + "Firms are perfectly competitive and can be described by an aggregate constant returns to scale production\n", + "function.\n", + "\n", + "\n", + "### Government\n", + "\n", + "The government redistributes aggregate income by means of a uniform lump-sum payment, which\n", + "amounts to a constant fraction $λ ∈ [0, 1]$ of aggregate tax revenues. The remainder is spent in a way such\n", + "that marginal utilities of agents are not affected.\n", + "\n", + "\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "## Results\n", + "\n", + "\n", + "### Wealth inequality\n", + "\n", + "How much does each of the various sources of heterogeneity contribute to wealth inequality in the benchmark economy? To answer this question, the authors start from the benchmark model, shut down one channel at a time, and report on the general equilibrium differences in Table 2.\n", + "\n", + "![Contribution of various channels for steady state wealth inequality in the benchmark model](Table2.png)\n", + "\n", + "Overall, discount factor heterogeneity does contribute positively to wealth inequality, but it is not the\n", + "most important factor. Instead, differences in returns are crucial. Line 7 shuts down return differences across wealth levels, line 8 return risk, while line 6 combines the two modifications. Overall, differences in mean returns across wealth levels are far more important, though at the very top idiosyncratic return risk matters equally.\n", + "\n", + "A striking feature of Table 2 is the fundamental importance of tax progressivity in keeping wealth inequality in check. Line 5 refers to a counterfactual that replaces the progressive income tax with a flat tax, such that aggregate tax revenues relative to output are unchanged. Wealth inequality is exploding. For example, the top 1% share increases from 27.4% to 89.2%.\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "### Dynamics\n", + "\n", + "Figure 9 displays the evolution of top wealth shares in the model (solid blue line) compared to the data as measured by {cite:t}`Saez2016-zm` using the capitalization method (SZ). In addition, whenever possible the graphs are augmented by survey estimates from the SCF (dashed yellow lines).\n", + "\n", + "![Top wealth shares in %, 1967-2012](Figure9.png)\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "## Conclusion\n", + "\n", + "Declining tax progressivity, together with increasing earnings risk and higher earnings inequality among top earners, can account for the rise in the capital-to-net-output ratio and at least some of the decline in the (gross) labor share when the elasticity of substitution between capital and labor is larger than one as in {cite:p}`Karabarbounis2014-el`. This model thus provides an alternative to the central mechanism—declining growth rates—to which Piketty (2014) draws attention in attempting to connect these macroeconomic trends to rising inequality.\n", + "\n", + "Moreover, the key mechanism accounting for dynamics lies in heterogeneous portfolios across and within wealth groups, along with systematic return movements in the data.\n" + ] + }, + { + "cell_type": "markdown", + "metadata": {}, + "source": [ + "## Subsequent literature\n", + "\n", + "For how later work addresses these issues, see the [Subsequent Literature](HKSWealthDistribution_subsequent-literature.ipynb) notebook.\n", + "\n", + "Work citing {cite:t}`Hubmer2018-dt` has moved in three directions:\n", + "\n", + "* (i) Policy analysis: The same type of wealth heterogeneity is used to study how monetary policy and tax reform affect inequality—e.g. {cite:p}`monetary_lenza_2020`; {cite:p}`monetary_lenza_2024` on monetary policy and inequality in the euro area, and {cite:p}`reforming_guner_2021` on income tax reform in Spain. \n", + "* (ii) Empirical discipline: Micro evidence on saving and returns by wealth (e.g. {cite:p}`saving_fagereng_2019` on capital gains across the wealth distribution) is used to validate and refine the mechanisms that generate the right tail. \n", + "* (iii) New channels and theory: Markups and market power ({cite:p}`markups_boar_2019`), culture and portfolios ({cite:p}`culture_fleck_2020`), and deeper theory for income-fluctuation problems and state-dependent discounting ({cite:p}`income_ma_2019`; {cite:p}`dynamic_stachurski_2019`) extend the framework. Together, this suggests the field is heading toward policy-relevant, empirically disciplined models that integrate multiple mechanisms.\n" + ] + } + ], + "metadata": { + "kernelspec": { + "display_name": "Python 3 (ipykernel)", + "language": "python", + "name": "python3" + }, + "language_info": { + "codemirror_mode": { + "name": "ipython", + "version": 3 + }, + "file_extension": ".py", + "mimetype": "text/x-python", + "name": "python", + "nbconvert_exporter": "python", + "pygments_lexer": "ipython3", + "version": "3.11.7" + } + }, + "nbformat": 4, + "nbformat_minor": 4 +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/myst.yml b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/myst.yml new file mode 100644 index 00000000..c7201fcd --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/myst.yml @@ -0,0 +1,14 @@ +version: 1 +project: + title: "A Comprehensive Quantitative Theory of the U.S. Wealth Distribution — Ballpark Entry" + bibliography: + - self.bib + - references.bib + - subsequent-literature.bib + toc: + - file: HKSWealthDistribution_intro.ipynb + - file: HKSWealthDistribution_prior-literature.ipynb + - file: HKSWealthDistribution_summary.ipynb + - file: HKSWealthDistribution_subsequent-literature.ipynb +site: + title: "A Comprehensive Quantitative Theory of the U.S. Wealth Distribution — Ballpark Entry" \ No newline at end of file diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/prior-literature.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/prior-literature.md new file mode 100644 index 00000000..3597edcf --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/prior-literature.md @@ -0,0 +1,16 @@ +# Prior Literature Summary: A Comprehensive Quantitative Theory of the U.S. Wealth Distribution + +## The papers my ballpark paper cites + +This literature can be summarized in three parts. First, standard incomplete-markets models in the Bewley–Aiyagari tradition show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. Second, later studies extend these models by introducing return risk, entrepreneurship, and wealth-dependent returns, which help generate fat-tailed wealth distributions consistent with theory. Third, empirical work documents long-run U.S. wealth and income inequality and provides quantitative methods, motivating a comprehensive model that combines heterogeneity, risk, and return differences. + + +## Key foundational papers + +- Aiyagari (1994) “Uninsured idiosyncratic risk and aggregate saving”: Establishes the standard incomplete-markets model with precautionary saving and borrowing constraints that serves as the baseline framework. +- Krusell & Smith (1998) “Income and wealth heterogeneity in the macroeconomy”: Develops the main quantitative method for solving heterogeneous-agent models with aggregate dynamics. +- Stachurski & Toda (2018) “An impossibility theorem for wealth in heterogeneous-agent models with limited heterogeneity”: Proves that standard Bewley–Aiyagari models (infinite-lived agents, risk-free saving, constant discount factors) cannot generate a heavier tail for wealth than for income. This forces the kind of extensions (return risk, entrepreneurship, etc.) that the 2018 paper uses. +- Benhabib, Bisin & Zhu (2015) “The wealth distribution in Bewley economies with capital income risk”: Shows that introducing idiosyncratic capital income risk generates a Pareto-tailed wealth distribution. +- Cagetti & De Nardi (2006) “Entrepreneurship, frictions, and wealth”: Provides a foundational model of entrepreneurship and borrowing constraints that explains top wealth concentration. +Piketty & Saez (2003) “Income inequality in the United States, 1913–1998”: Documents long-run trends in top income shares in the United States. +Saez & Zucman (2016) “Wealth inequality in the United States since 1913”: Constructs comprehensive long-run data on U.S. wealth inequality that serves as the main empirical benchmark. diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions.md new file mode 100644 index 00000000..6e2da55e --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions.md @@ -0,0 +1,14 @@ +# Proposed Revisions: A Comprehensive Quantitative Theory of the U.S. Wealth Distribution + +## Prior Literature section to add +The paper builds on three strands of work. First, Bewley–Aiyagari models (Aiyagari 1994, Huggett 1993, Krusell & Smith 1998) show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. Second, introduce wealth-dependent returns: Benhabib, Bisin & Zhu (2015) show that capital income risk generates a Pareto tail; Cagetti & De Nardi (2006) model entrepreneurship and top wealth; Stachurski & Toda (2018) prove that in the standard setup (risk-free saving, constant discount factors) the wealth distribution cannot have a heavier tail than income, so such extensions are necessary. Third, empirical work documents long-run U.S. inequality (Piketty & Saez 2003, Saez & Zucman 2016) and motivates a comprehensive model that combines these ingredients to match the full distribution. + +## Subsequent Literature section to add + +Work citing HKS (2018) has moved in three directions. (1) Policy analysis: The same type of wealth heterogeneity is used to study how monetary policy and tax reform affect inequality—e.g. Lenza & Slačálek (2020, 2024) on monetary policy and inequality in the euro area, and Guner et al. (2021) on income tax reform in Spain. (2) Empirical discipline: Micro evidence on saving and returns by wealth (e.g. Fagereng, Holm, Moll & Natvik 2019 on capital gains across the wealth distribution) is used to validate and refine the mechanisms that generate the right tail. (3) New channels and theory: Markups and market power (Boar & Midrigan 2019), culture and portfolios (Fleck & Monninger 2020), and deeper theory for income-fluctuation problems and state-dependent discounting (Ma, Stachurski & Toda 2019; Stachurski & Zhang 2019) extend the framework. Together, this suggests the field is heading toward policy-relevant, empirically disciplined models that integrate multiple mechanisms. + + +## Other improvements +Title: Change “Hubmer, Krusell, and Smith (Forthcoming)” to “Hubmer, Krusell, and Smith (2018)”. +Summary: After the first paragraph, add one sentence on the gap: “Prior work had shown that standard incomplete-markets models cannot generate wealth more concentrated than income, and had proposed separate mechanisms (return risk, entrepreneurship, tax progressivity); this paper provides a single quantitative model that unifies these channels and matches the full U.S. wealth distribution.” +Placement: Insert Prior Literature after Overview, before The model. Insert Subsequent Literature after Conclusion, at the end of the notebook. \ No newline at end of file diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/prior-literature.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/prior-literature.md new file mode 100644 index 00000000..3597edcf --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/prior-literature.md @@ -0,0 +1,16 @@ +# Prior Literature Summary: A Comprehensive Quantitative Theory of the U.S. Wealth Distribution + +## The papers my ballpark paper cites + +This literature can be summarized in three parts. First, standard incomplete-markets models in the Bewley–Aiyagari tradition show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. Second, later studies extend these models by introducing return risk, entrepreneurship, and wealth-dependent returns, which help generate fat-tailed wealth distributions consistent with theory. Third, empirical work documents long-run U.S. wealth and income inequality and provides quantitative methods, motivating a comprehensive model that combines heterogeneity, risk, and return differences. + + +## Key foundational papers + +- Aiyagari (1994) “Uninsured idiosyncratic risk and aggregate saving”: Establishes the standard incomplete-markets model with precautionary saving and borrowing constraints that serves as the baseline framework. +- Krusell & Smith (1998) “Income and wealth heterogeneity in the macroeconomy”: Develops the main quantitative method for solving heterogeneous-agent models with aggregate dynamics. +- Stachurski & Toda (2018) “An impossibility theorem for wealth in heterogeneous-agent models with limited heterogeneity”: Proves that standard Bewley–Aiyagari models (infinite-lived agents, risk-free saving, constant discount factors) cannot generate a heavier tail for wealth than for income. This forces the kind of extensions (return risk, entrepreneurship, etc.) that the 2018 paper uses. +- Benhabib, Bisin & Zhu (2015) “The wealth distribution in Bewley economies with capital income risk”: Shows that introducing idiosyncratic capital income risk generates a Pareto-tailed wealth distribution. +- Cagetti & De Nardi (2006) “Entrepreneurship, frictions, and wealth”: Provides a foundational model of entrepreneurship and borrowing constraints that explains top wealth concentration. +Piketty & Saez (2003) “Income inequality in the United States, 1913–1998”: Documents long-run trends in top income shares in the United States. +Saez & Zucman (2016) “Wealth inequality in the United States since 1913”: Constructs comprehensive long-run data on U.S. wealth inequality that serves as the main empirical benchmark. diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/proposed-revisions.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/proposed-revisions.md new file mode 100644 index 00000000..6e2da55e --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/proposed-revisions.md @@ -0,0 +1,14 @@ +# Proposed Revisions: A Comprehensive Quantitative Theory of the U.S. Wealth Distribution + +## Prior Literature section to add +The paper builds on three strands of work. First, Bewley–Aiyagari models (Aiyagari 1994, Huggett 1993, Krusell & Smith 1998) show how uninsurable risk and borrowing constraints generate precautionary saving and inequality, but they cannot explain why wealth is much more concentrated than income. Second, introduce wealth-dependent returns: Benhabib, Bisin & Zhu (2015) show that capital income risk generates a Pareto tail; Cagetti & De Nardi (2006) model entrepreneurship and top wealth; Stachurski & Toda (2018) prove that in the standard setup (risk-free saving, constant discount factors) the wealth distribution cannot have a heavier tail than income, so such extensions are necessary. Third, empirical work documents long-run U.S. inequality (Piketty & Saez 2003, Saez & Zucman 2016) and motivates a comprehensive model that combines these ingredients to match the full distribution. + +## Subsequent Literature section to add + +Work citing HKS (2018) has moved in three directions. (1) Policy analysis: The same type of wealth heterogeneity is used to study how monetary policy and tax reform affect inequality—e.g. Lenza & Slačálek (2020, 2024) on monetary policy and inequality in the euro area, and Guner et al. (2021) on income tax reform in Spain. (2) Empirical discipline: Micro evidence on saving and returns by wealth (e.g. Fagereng, Holm, Moll & Natvik 2019 on capital gains across the wealth distribution) is used to validate and refine the mechanisms that generate the right tail. (3) New channels and theory: Markups and market power (Boar & Midrigan 2019), culture and portfolios (Fleck & Monninger 2020), and deeper theory for income-fluctuation problems and state-dependent discounting (Ma, Stachurski & Toda 2019; Stachurski & Zhang 2019) extend the framework. Together, this suggests the field is heading toward policy-relevant, empirically disciplined models that integrate multiple mechanisms. + + +## Other improvements +Title: Change “Hubmer, Krusell, and Smith (Forthcoming)” to “Hubmer, Krusell, and Smith (2018)”. +Summary: After the first paragraph, add one sentence on the gap: “Prior work had shown that standard incomplete-markets models cannot generate wealth more concentrated than income, and had proposed separate mechanisms (return risk, entrepreneurship, tax progressivity); this paper provides a single quantitative model that unifies these channels and matches the full U.S. wealth distribution.” +Placement: Insert Prior Literature after Overview, before The model. Insert Subsequent Literature after Conclusion, at the end of the notebook. \ No newline at end of file diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/subsequent-literature-analysis.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/subsequent-literature-analysis.md new file mode 100644 index 00000000..ab2b6f89 --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/subsequent-literature-analysis.md @@ -0,0 +1,15 @@ +# Subsequent Literature Analysis: [Paper Title] + +## Papers that cite my ballpark paper + +I found 14 papers in LitMaps. + +## What the subsequent literature tells us + +The subsequent literature shows that ideas of the model used in "HKS" paper are increasingly used for policy analysis, especially to study how monetary and fiscal policies affect different parts of the wealth distribution, rather than only matching inequality patterns. At the same time, new empirical and theoretical work strengthens these models by disciplining saving and return behavior with micro data and by providing deeper foundations for income risk and discount-factor heterogeneity. More recent studies also introduce new channels such as market power and beliefs, suggesting that future research needs to integrate multiple mechanisms to better explain changes in wealth inequality. + +## Most important subsequent papers + +1. Fagereng, Holm, Moll & Natvik (2019) “Saving Behavior Across the Wealth Distribution: The Importance of Capital Gains”: Puts empirical structure on saving and returns by wealth. Critical for validating and refining the mechanisms that generate the right tail in HKS. +2. Boar & Midrigan (2019) “Markups and Inequality”: Shifts the focus from individual saving and income to how market power and product market structure shape inequality, broadening the agenda to firm- and market-driven sources of wealth concentration. +3. Ma, Stachurski & Toda (2019) “The income fluctuation problem and the evolution of wealth” (JET): Provides theoretical link from the income fluctuation problem to the evolution and shape of the wealth distribution. Clarifies when and how HKS-style dynamics arise from first principles. \ No newline at end of file diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/subsequent-literature.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/subsequent-literature.bib new file mode 100644 index 00000000..cadb23fd --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/subsequent-literature.bib @@ -0,0 +1,129 @@ +% Exported from Litmaps (https://www.litmaps.com) + +@article{monetary_lenza_2024, + title = {How does monetary policy affect income and wealth inequality? Evidence from quantitative easing in the euro area}, + doi = {10.1002/jae.3053}, + author = {Lenza, M. and Slačálek, Jiří}, + journal = {Journal of applied econometrics}, + year = {2024}, + litmapsId = {271556094} +} + + +@article{saving_fagereng_2019, + title = {Saving Behavior Across the Wealth Distribution: The Importance of Capital Gains}, + doi = {10.3386/w26588}, + author = {Fagereng, Å. and Holm, Martin B. and Moll, Benjamin and Natvik, G.}, + year = {2019}, + litmapsId = {279248643} +} + + +@article{reforming_guner_2021, + title = {Reforming the Individual Income Tax in Spain}, + doi = {10.2139/ssrn.3783818}, + author = {Guner, Nezih and Lopez-Segovia, Javier and Ramos, Roberto}, + journal = {Social Science Research Network}, + year = {2021}, + litmapsId = {2143757} +} + + +@article{income_ma_2019, + title = {The income fluctuation problem and the evolution of wealth}, + doi = {10.1016/j.jet.2020.105003}, + author = {Ma, Qingyin and Stachurski, J. and Toda, Alexis Akira}, + journal = {Journal of Economics Theory}, + year = {2019}, + litmapsId = {279399271} +} + + +@article{markups_boar_2019, + title = {Markups and Inequality}, + doi = {10.3386/w25952}, + author = {Boar, Corina and Midrigin, Virgiliu}, + journal = {Social Science Research Network}, + year = {2019}, + litmapsId = {280089818} +} + + +@article{credit_nakajima_2014, + title = {CREDIT, BANKRUPTCY, AND AGGREGATE FLUCTUATIONS}, + doi = {10.21799/frbp.wp.2014.31}, + author = {Nakajima, Makoto and Ríos-Rull, José-Víctor}, + journal = {Social Science Research Network}, + year = {2014}, + litmapsId = {47206598} +} + + +@article{dynamic_stachurski_2019, + title = {Dynamic programming with state-dependent discounting}, + doi = {10.1016/j.jet.2021.105190}, + author = {Stachurski, J. and Zhang, Junnan}, + journal = {Journal of Economics Theory}, + year = {2019}, + litmapsId = {279521359} +} + + +@article{monetary_lenza_2020, + title = {How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from the Euro Area}, + author = {Lenza, M. and Slačálek, Jiří}, + year = {2020}, + litmapsId = {230426140} +} + + +@article{monetary_lenza_2020, + title = {How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area}, + author = {Lenza, M. and Slacalek, Jiri and Adam, Klaus and Bicakova, Alena and Brun, Lídia and Constâncio, Vítor and Dossche, Maarten and Ehrmann, Michael and Fuchs-Schündeln, Nicola and Galí, Jordi and Garbinti, Bertrand and Georgarakos, Dimitris and Giannone, Domenico and Jarociński, Marek and Mackowiak, Bartosz and Martin, Alberto and Masuch, K. and Monnin, Pierre and Primiceri, Giorgio and Roma, Moreno and Rosolia, A. and Samarina, A. and Tristani, O. and Tujula, Mika and Tzamourani, P. and Violante, Gianluca and Winkler, Bernhard and Wolf, Christian and Wright, Jonathan}, + year = {2020}, + litmapsId = {273944547} +} + + +@article{culture_fleck_2020, + title = {Culture and Portfolios: Trust, Precautionary Savings and Home Ownership}, + doi = {10.2139/ssrn.3676330}, + author = {Fleck, J. and Monninger, Adrian}, + journal = {Social Science Research Network}, + year = {2020}, + litmapsId = {8294873} +} + + +@article{monetary_lenza_2020, + title = {How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area}, + author = {Lenza, M. and Slacalek, Jiri and Adam, Klaus and Bicakova, Alena and Brun, Lídia and Constâncio, Vítor and Dossche, Maarten and Ehrmann, Michael and Fuchs-Schündeln, Nicola and Galí, J. and Garbinti, Bertrand and Georgarakos, Dimitris and Giannone, Domenico and Jarociński, Marek and Mackowiak, Bartosz and Martin, Alberto and Masuch, K. and Monnin, Pierre and Primiceri, Giorgio and Roma, Moreno and Rosolia, A. and Samarina, A. and Tristani, O. and Tujula, Mika and Tzamourani, P. and Violante, Gianluca and Winkler, Bernhard and Wolf, Christian and Wright, Jonathan}, + year = {2020}, + litmapsId = {276451541} +} + + +@article{monetary_lenza_2019, + title = {How Does Monetary Policy A ect Income and Wealth Inequality ? Evidence from Quantitative Easing in the Euro Area February 14 , 2019}, + author = {Lenza, M. and Slačálek, Jiří}, + year = {2019}, + litmapsId = {234364312} +} + + +@article{dynamic_ma_2019, + title = {Dynamic Optimal Choice When Rewards are Unbounded Below}, + author = {Ma, Qingyin and Stachurski, John}, + journal = {arXiv: Theoretical Economics}, + year = {2019}, + litmapsId = {205598189} +} + + +@article{n_ma_2019, + title = {N ov 2 01 9 Dynamic optimal choice when rewards are unbounded below 1}, + author = {Ma, Qingyin and Stachurski, J.}, + year = {2019}, + litmapsId = {242010840} +} + diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/wealth_inequality.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/wealth_inequality.bib new file mode 100644 index 00000000..161ed996 --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/proposed-revisions/wealth_inequality.bib @@ -0,0 +1,1334 @@ +@ARTICLE{GabaixUnknown-mc, + title = "The Dynamics of Inequality", + author = "Gabaix, Xavier and Lasry, Jean-Michel and Lions, Pierre-Louis and + Moll, Benjamin", + abstract = "The past forty years have seen a rapid rise in top income + inequality in the United States. While there is a large number of + existing theories of the Pareto tail of the long-run income + distributions, almost none of these address the fast rise in top + inequality observed in the data. We show that standard theories, + which build on a random growth mechanism, generate transition + dynamics that are an order of magnitude too slow relative to those + observed in the data. We then suggest two parsimonious deviations + from the canonical model that can explain such changes: ``scale + dependence'' that may arise from changes in skill prices, and + ``type dependence,'' i.e. the presence of some ``high-growth + types.'' These deviations are consistent with theories in which + the increase in top income inequality is driven by the rise of + ``superstar'' entrepreneurs or managers." +} + + +@ARTICLE{Unknown2016-bh, + title = "Office Tax Analysis: Taxes Paid Capital Gains Returns Positive Net + Capital Gains", + pages = "1954--2014", + year = 2016 +} + +@ARTICLE{Toda2019-kd, + title = "Wealth distribution with random discount factors", + author = "Toda, Alexis Akira", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 104, + pages = "101--113", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{Toda2014-py, + title = "Incomplete market dynamics and cross-sectional distributions", + author = "Toda, Alexis Akira", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 154, + pages = "310--348", + abstract = "The size distributions of many economic variables seem to obey + the double power law, that is, the power law holds in both the + upper and the lower tails. I explain this emergence of the double + power law—which has important economic, econometric, and social + implications—using a tractable dynamic stochastic general + equilibrium model with heterogeneous agents subject to aggregate + and idiosyncratic investment risks. I establish theoretical + properties such as existence, uniqueness, and constrained + efficiency of equilibrium, and provide a numerical algorithm that + is guaranteed to converge. The model is widely applicable: it + allows for arbitrary homothetic CRRA recursive preferences, an + arbitrary Markov process governing aggregate shocks, and an + arbitrary number of technologies and assets with arbitrary + portfolio constraints.", + month = nov, + year = 2014, + language = "en" +} + +@ARTICLE{Stiglitz1969-hx, + title = "Distribution of income and wealth among individuals", + author = "Stiglitz, J E", + journal = "Econometrica", + publisher = "JSTOR", + volume = 37, + number = 3, + pages = 382, + month = aug, + year = 1969 +} + +@ARTICLE{Stachurski2018-pa, + title = "An impossibility theorem for wealth in heterogeneous-agent + models with limited heterogeneity", + author = "Stachurski, John and Toda, Alexis Akira", + journal = "arXiv [econ.GN]", + abstract = "It has been conjectured that canonical + Bewley--Huggett--Aiyagari heterogeneous-agent models cannot + explain the joint distribution of income and wealth. The + results stated below verify this conjecture and clarify its + implications under very general conditions. We show in + particular that if (i) agents are infinitely-lived, (ii) + saving is risk-free, and (iii) agents have constant discount + factors, then the wealth distribution inherits the tail + behavior of income shocks (e.g., light-tailedness or the + Pareto exponent). Our restrictions on utility require only + that relative risk aversion is bounded, and a large variety + of income processes are admitted. Our results show + conclusively that it is necessary to go beyond standard + models to explain the empirical fact that wealth is + heavier-tailed than income. We demonstrate through examples + that relaxing any of the above three conditions can generate + Pareto tails.", + month = jul, + year = 2018, + archivePrefix = "arXiv", + primaryClass = "econ.GN" +} + +@ARTICLE{Saez2016-zm, + title = "Wealth inequality in the United States since 1913: Evidence from + capitalized income tax data", + author = "Saez, Emmanuel and Zucman, Gabriel", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 131, + number = 2, + pages = "519--578", + abstract = "AbstractThis paper combines income tax returns with macroeconomic + household balance sheets to estimate the distribution of wealth + in the United States since 1913. We estimate wealth by + capitalizing the incomes reported by individual taxpayers, + accounting for assets that do not generate taxable income. We + successfully test our capitalization method in three micro + datasets where we can observe both income and wealth: the Survey + of Consumer Finance, linked estate and income tax returns, and + foundations’ tax records. We find that wealth concentration was + high in the beginning of the twentieth century, fell from 1929 to + 1978, and has continuously increased since then. The top 0.1\% + wealth share has risen from 7\% in 1978 to 22\% in 2012, a level + almost as high as in 1929. Top wealth-holders are younger today + than in the 1960s and earn a higher fraction of the economy’s + labor income. The bottom 90\% wealth share first increased up to + the mid-1980s and then steadily declined. The increase in wealth + inequality in recent decades is due to the upsurge of top incomes + combined with an increase in saving rate inequality. We explain + how our findings can be reconciled with Survey of Consumer + Finances and estate tax data.", + month = may, + year = 2016, + language = "en" +} + +@INCOLLECTION{Quadrini2015-bp, + title = "Inequality in Macroeconomics", + author = "Quadrini, Vincenzo and Ríos-Rull, José-Víctor", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1229--1302", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Quadrini2000-yd, + title = "Entrepreneurship, saving, and social mobility", + author = "Quadrini, Vincenzo", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 3, + number = 1, + pages = "1--40", + month = jan, + year = 2000, + language = "en" +} + +@INCOLLECTION{Piketty2015-mp, + title = "Wealth and inheritance in the Long Run", + author = "Piketty, Thomas and Zucman, Gabriel", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1303--1368", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Piketty2007-fo, + title = "How progressive is the {U}.s. federal tax system? A historical + and international perspective", + author = "Piketty, Thomas and Saez, Emmanuel", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 21, + number = 1, + pages = "3--24", + abstract = "This paper provides estimates of federal tax rates by income + groups in the United States since 1960, with special emphasis on + very top income groups. We include individual and corporate + income taxes, payroll taxes, and estate and gift taxes. The + progressivity of the U.S. federal tax system at the top of the + income distribution has declined dramatically since the 1960s. + This dramatic drop in progressivity is due primarily to a drop in + corporate taxes and in estate and gift taxes combined with a + sharp change in the composition of top incomes away from capital + income and toward labor income. The sharp drop in statutory top + marginal individual income tax rates has contributed only + moderately to the decline in tax progressivity. International + comparisons confirm that is it critical to take into account + other taxes than the individual income tax to properly assess the + extent of overall tax progressivity, both for time trends and for + cross-country comparisons. The pattern for the United Kingdom is + similar to the U.S. pattern. France had less progressive taxes + than the United States or the United Kingdom in 1970 but has + experienced an increase in tax progressivity and has now a more + progressive tax system than the United States or the United + Kingdom.", + month = jan, + year = 2007, + language = "en" +} + +@ARTICLE{Piketty2003-xn, + title = "Income inequality in the United States, 1913-1998", + author = "Piketty, T and Saez, E", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 118, + number = 1, + pages = "1--41", + month = feb, + year = 2003, + language = "en" +} + +@ARTICLE{Gagnon2014-ko, + title = "Piketty, {T}. (2014), capital in the twenty-first century + (translated by Arthur Goldhammer), the Belknap press of Harvard + university press, Cambridge, mass. 685 p", + author = "Gagnon, Jean-Marie", + journal = "Actual. Econ.", + publisher = "Consortium Erudit", + volume = 90, + number = 4, + pages = 329, + year = 2014 +} + +@ARTICLE{Piketty2003-zj, + title = "Income Inequality in France, {1901–1998}", + author = "Piketty, Thomas", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 5, + pages = "1004--1042", + abstract = "The objective of this research is to document and to explain + trends in inequality in 20th century France. Data from income tax + returns (1915-98), wage tax returns (1919-98) and inheritance tax + returns (1902-94), is used in order to compute fully homogeneous, + yearly estimates of income inequality, wage inequality and wealth + inequality. The main conclusion is that the decline in income + inequality that took place during the first half of the 20th + century was mostly accidental. In France and possibly in a number + of other developed countries as well wage inequality has actually + been extremely stable in the long run, and the secular decline in + income inequality is for the most part a capital income + phenomenon. Holders of very large fortunes were severely hit by + major shocks during the 1914-45 period, and were never able to + fully recover from these shocks, probably because of the dynamic + effects of progressive taxation on capital accumulation and + pre-tax income inequality.", + month = oct, + year = 2003 +} + +@ARTICLE{Piketty1997-dn, + title = "The dynamics of the wealth distribution and the interest rate + with credit rationing", + author = "Piketty, Thomas", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 64, + number = 2, + pages = 173, + abstract = "With decreasing returns and first-best credit, the long-run + interest rate and aggregate output are uniquely determined, and + wealth dispersion among individuals or firms is irrelevant. + Introducing credit rationing into the Solow model modifies these + conclusions. Multiple stationary interest rates and wealth + distributions can exist because higher initial rates can be + self-reinforcing through higher credit rationing and lower + capital accumulation. The wealth accumulation process is ergodic + in every steady state, but wealth mobility is lower with higher + steady-state interest rates. Aggregate output is higher in steady + states with lower interest rates because credit is better + allocated. Short-run interest rate or distribution shocks can be + self-sustaining and can have long-run effects on output through + the induced dynamics of the wealth distribution and credit + rationing.", + month = apr, + year = 1997 +} + +@ARTICLE{Piketty1995-ml, + title = "Social Mobility and Redistributive Politics", + author = "Piketty, T", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 110, + number = 3, + pages = "551--584", + abstract = "Just like economists, voters have conflicting views about + redistributive taxation because they estimate its incentive costs + differently. We model rational agents as trying to learn from + their dynastic income mobility experience the relative importance + of effort and predetermined factors in the generation of income + inequality and therefore the magnitude of these incentive costs. + In the long run, ``left-wing dynasties'' believing less in + individual effort and voting for more redistribution coexist with + ``right-wing dynasties.'' This allows us to explain why + individual mobility experience and not only current income + matters for political attiitudes and how persistent differences + in perceptions about social mobility can generate persistent + differences in redistribution across countries.", + month = aug, + year = 1995 +} + +@INCOLLECTION{Piazzesi2016-no, + title = "Housing and macroeconomics", + author = "Piazzesi, M and Schneider, M", + booktitle = "Handbook of Macroeconomics", + publisher = "Elsevier", + pages = "1547--1640", + series = "Handbook of Macroeconomics", + year = 2016, + language = "en" +} + +@ARTICLE{Nirei2016-ya, + title = "Pareto distribution of income in neoclassical growth models", + author = "Nirei, Makoto and Aoki, Shuhei", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 20, + pages = "25--42", + abstract = "We construct a neoclassical growth model with heterogeneous + households that accounts for the Pareto distributions of income + and wealth in the upper tail. In an otherwise standard Bewley + model, we feature households' business productivity risks and + borrowing constraints, which we find generate the Pareto + distributions. Households with low productivity rely on wages and + returns from safe assets, while high productivity households + choose not to diversify their business risks. The model can + quantitatively account for the observed income distribution in + the U.S. under reasonable calibrations. Furthermore, we conduct + several comparative statics to examine how changes in parameters + affect the Pareto distributions. In particular, we find that the + change in the top tax rates in the 1980s potentially accounts for + much of the observed increase in top income dispersion in the + last decades. Our analytical result provides a coherent + interpretation for the numerical comparative statics.", + month = apr, + year = 2016, + language = "en" +} + +@ARTICLE{Mehra1985-rw, + title = "The equity premium: A puzzle", + author = "Mehra, Rajnish and Prescott, Edward C", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 15, + number = 2, + pages = "145--161", + abstract = "Restrictions that a class of general equilibrium models place + upon the average returns of equity and Treasury bills are found + to be strongly violated by the U.S. data in the 1889–1978 period. + This result is robust to model specification and measurement + problems. We conclude that, most likely, an equilibrium model + which is not an Arrow-Debreu economy will be the one that + simultaneously rationalizes both historically observed large + average equity return and the small average risk-free return.", + month = mar, + year = 1985, + language = "en" +} + +@ARTICLE{McKay2016-rr, + title = "The role of automatic stabilizers in the {U}.s. business cycle", + author = "McKay, Alisdair and Reis, Ricardo", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 84, + number = 1, + pages = "141--194", + year = 2016, + language = "en" +} + +@ARTICLE{McKay2016-qy, + title = "The power of forward guidance revisited", + author = "McKay, Alisdair and Nakamura, Emi and Steinsson, Jón", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 106, + number = 10, + pages = "3133--3158", + abstract = "In recent years, central banks have increasingly turned to + forward guidance as a central tool of monetary policy. Standard + monetary models imply that far future forward guidance has huge + effects on current outcomes, and these effects grow with the + horizon of the forward guidance. We present a model in which the + power of forward guidance is highly sensitive to the assumption + of complete markets. When agents face uninsurable income risk and + borrowing constraints, a precautionary savings effect tempers + their responses to changes in future interest rates. As a + consequence, forward guidance has substantially less power to + stimulate the economy. (JEL E21, E40, E50)", + month = oct, + year = 2016, + language = "en" +} + +@ARTICLE{Krusell2015-ml, + title = "Piketty's Second Law Capitalism Fundamental?", + author = "Krusell, P", + journal = "Journal Political Economy", + volume = 123, + number = 4, + pages = "725--748", + year = 2015 +} + +@INCOLLECTION{Krusell2013-tv, + title = "Quantitative macroeconomic models with heterogeneous agents", + author = "Krusell, Per and Smith, Jr, Anthony A", + editor = "Blundell, Richard and Newey, Whitney K and Persson, Torsten", + booktitle = "Advances in Economics and Econometrics", + publisher = "Cambridge University Press", + address = "Cambridge", + pages = "298--340", + year = 2013 +} + +@ARTICLE{Krusell1998-cr, + title = "Income and wealth heterogeneity in the macroeconomy", + author = "Krusell, Per and Smith, Jr, Anthony A", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 106, + number = 5, + pages = "867--896", + abstract = "How do movements in the distribution of income and wealth affect + the macroeconomy? We analyze this question theoretically, using + numerical methods, in the context of a calibrated version of the + stochastic growth model with partially uninsurable idiosyncratic + risk and movements in aggregate productivity.", + month = oct, + year = 1998 +} + +@ARTICLE{Krusell2009-jt, + title = "Revisiting the welfare effects of eliminating business cycles", + author = "Krusell, Per and Mukoyama, Toshihiko and Şahin, Ayşegül and + Smith, Jr, Anthony A", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 12, + number = 3, + pages = "393--404", + abstract = "We investigate the welfare effects of eliminating business cycles + in a model with substantial consumer heterogeneity. The + heterogeneity arises from uninsurable and idiosyncratic + uncertainty in preferences and employment status. We calibrate + the model to match the distribution of wealth in U.S. data and + features of transitions between employment and unemployment. In + comparison with much of the literature, we find rather large + effects. For our benchmark model, we find welfare effects that, + on average across all consumers, are of a bit more than one order + of magnitude larger than those computed by Lucas [Lucas Jr., + R.E., 1987. Models of Business Cycles. Basil Blackwell, New + York]. When we distinguish long- from short-term unemployment, + long-term unemployment being distinguished by poor (and highly + procyclical) employment prospects and low unemployment + compensation, the average gain from eliminating cycles is as much + as 1\% in consumption equivalents. In addition, in both models, + there are large differences across groups: very poor consumers + gain a lot when cycles are removed (the long-term unemployed as + much as around 30\%), as do very rich consumers, whereas the + majority of consumers—the “middle class”—sees much smaller gains + from removing cycles. Inequality also rises substantially upon + removing cycles.", + month = jul, + year = 2009, + language = "en" +} + +@ARTICLE{Kopczuk2004-bb, + title = "Top wealth shares in the United States, {1916–2000}: Evidence + from estate tax returns", + author = "Kopczuk, Wojciech and Saez, Emmanuel", + journal = "Natl. Tax J.", + publisher = "University of Chicago Press", + volume = 57, + number = "2.2", + pages = "445--487", + month = jun, + year = 2004, + language = "en" +} + +@ARTICLE{Kopczuk2015-zp, + title = "What do we know about the evolution of top wealth shares in the + United States?", + author = "Kopczuk, Wojciech", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 29, + number = 1, + pages = "47--66", + abstract = "I discuss available evidence about the evolution of top wealth + shares in the United States over the course of the 20th century. + The three main approaches—the Survey of Consumer Finances, estate + tax multiplier, and capitalization methods—generate generally + consistent findings until mid-1980s but diverge since then, with + the capitalization method showing a dramatic increase in wealth + concentration and the other two methods showing at best a small + increase. I discuss strengths and weaknesses of different + approaches. The increase in capitalization estimates since 2000 + is driven by a dramatic and puzzling increase in fixed income + assets. There is evidence that estate tax estimates may not be + sufficiently accounting for mortality improvements over time. The + nonresponse and coverage issues in the SCF are a concern. I + conclude that the changing nature of top incomes and the + increased importance of self-made wealth may explain difficulties + in implementing each of the methods and why the results diverge.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Kesten1973-qv, + title = "Random difference equations and Renewal theory for products of + random matrices", + author = "Kesten, Harry", + journal = "Acta Math.", + publisher = "International Press of Boston", + volume = 131, + number = 0, + pages = "207--248", + year = 1973, + language = "en" +} + +@ARTICLE{Kennickell2017-fa, + title = "Tossed and turned: Wealth dynamics of {U}.{S}. households + 2007-2009", + author = "Kennickell, Arthur B", + journal = "Stat. J. IAOS", + publisher = "SAGE Publications", + volume = 33, + number = 1, + pages = "175--183", + month = mar, + year = 2017 +} + +@ARTICLE{Kaymak2016-wg, + title = "The evolution of wealth inequality over half a century: The role + of taxes, transfers and technology", + author = "Kaymak, Barış and Poschke, Markus", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "1--25", + abstract = "Over the last 50 years the U.S. tax system went through a + striking transformation that reduced the effective tax rates for + top income groups and raised transfers to seniors. This paper + investigates the macroeconomic repercussions of this change in + policy, particularly for the distributions of income, wealth and + consumption. Changes in taxes and transfers account for nearly + half of the rise in wealth concentration. Nonetheless, their + impact on the distributions of income and consumption has been + minor due to changes in equilibrium prices and the offsetting + effects of tax cuts and transfers on the dispersion of + consumption. Results highlight the role of increasing wage + dispersion during this period as the main driver of trends in + inequality.", + month = feb, + year = 2016, + language = "en" +} + +@ARTICLE{Katz1992-yc, + title = "Changes in relative wages, 1963-1987: Supply and demand factors", + author = "Katz, L F and Murphy, K M", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 107, + number = 1, + pages = "35--78", + month = feb, + year = 1992 +} + +@ARTICLE{Kartashova2014-ca, + title = "Private equity premium puzzle revisited", + author = "Kartashova, Katya", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 104, + number = 10, + pages = "3297--3334", + abstract = "This paper revisits the results of Moskowitz and + Vissing-Jørgensen (2002) on returns to entrepreneurial + investments in the United States. Following the authors' + methodology and new data from the Survey of Consumer Finances, I + find that the “private equity premium puzzle” does not survive + the period of high public equity returns in the 1990s. The + difference between private and public equity returns is positive + and large period-by-period between 1999 and 2007. Whereas in the + 2008–2010 period, overlapping with the Great Recession, public + and private equities performances are substantially closer. I + validate these results in the aggregate data going back to the + 1960s. (JEL G11, G12, L26)", + month = oct, + year = 2014, + language = "en" +} + +@ARTICLE{Karabarbounis2014-el, + title = "The global decline of the labor share", + author = "Karabarbounis, Loukas and Neiman, Brent", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 129, + number = 1, + pages = "61--103", + abstract = "AbstractThe stability of the labor share of income is a key + foundation in macroeconomic models. We document, however, that + the global labor share has significantly declined since the early + 1980s, with the decline occurring within the large majority of + countries and industries. We show that the decrease in the + relative price of investment goods, often attributed to advances + in information technology and the computer age, induced firms to + shift away from labor and toward capital. The lower price of + investment goods explains roughly half of the observed decline in + the labor share, even when we allow for other mechanisms + influencing factor shares, such as increasing profits, + capital-augmenting technology growth, and the changing skill + composition of the labor force. We highlight the implications of + this explanation for welfare and macroeconomic dynamics.", + month = feb, + year = 2014, + language = "en" +} + +@BOOK{Karabarbounis2014-xe, + title = "Capital Depreciation Labor Shares Around World: Measurement + Implications", + author = "Karabarbounis, L and Neiman, B", + year = 2014 +} + +@ARTICLE{Kaplan2018-sr, + title = "Monetary policy according to {HANK}", + author = "Kaplan, Greg and Moll, Benjamin and Violante, Giovanni L", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 108, + number = 3, + pages = "697--743", + abstract = "We revisit the transmission mechanism from monetary policy to + household consumption in a Heterogeneous Agent New Keynesian + (HANK) model. The model yields empirically realistic + distributions of wealth and marginal propensities to consume + because of two features: uninsurable income shocks and multiple + assets with different degrees of liquidity and different returns. + In this environment, the indirect effects of an unexpected cut in + interest rates, which operate through a general equilibrium + increase in labor demand, far outweigh direct effects such as + intertemporal substitution. This finding is in stark contrast to + small- and medium-scale Representative Agent New Keynesian (RANK) + economies, where the substitution channel drives virtually all of + the transmission from interest rates to consumption. Failure of + Ricardian equivalence implies that, in HANK models, the fiscal + reaction to the monetary expansion is a key determinant of the + overall size of the macroeconomic response. (JEL D31, E12, E21, + E24, E43, E52, E62)", + month = mar, + year = 2018, + language = "en" +} + +@ARTICLE{Jorda2017-jd, + title = "The rate of return on everything, {1870–2015}", + author = "Jorda, Oscar and {Federal Reserve Bank of San Francisco} and + Knoll, Katharina and Kuvshinov, Dmitry and Schularick, Moritz and + Taylor, Alan M and {Deutsche Bundesbank} and {University of Bonn} + and {University of Bonn} and {University of Bonn}", + journal = "Federal Reserve Bank of San Francisco, Working Paper Series", + publisher = "Federal Reserve Bank of San Francisco", + pages = "01--123", + abstract = "What is the aggregate real rate of return in the economy? Is it + higher than the growth rate of the economy and, if so, by how + much? Is there a tendency for returns to fall in the long-run? + Which particular assets have the highest long-run returns? We + answer these questions on the basis of a new and comprehensive + dataset for all major asset classes, including housing. The + annual data on total returns for equity, housing, bonds, and + bills cover 16 advanced economies from 1870 to 2015, and our new + evidence reveals many new findings and puzzles.", + month = dec, + year = 2017 +} + +@ARTICLE{Huggett1993-af, + title = "The risk-free rate in heterogeneous-agent incomplete-insurance + economies", + author = "Huggett, Mark", + journal = "J. Econ. Dyn. Control", + publisher = "Elsevier BV", + volume = 17, + number = "5-6", + pages = "953--969", + abstract = "Why has the average real risk-free interest rate been less than + one percent? The question is motivated by the failure of a class + of calibrated representative-agent economies to explain the + average return to equity and risk-free debt. I construct an + economy where agents experience uninsurable idiosyncratic + endowment shocks and smooth consumption by holding a risk-free + asset. I calibrate the economy and characterize equilibria + computationally. With a borrowing constraint of one year's + income, the resulting risk-free rate is more than one percent + below the rate in the comparable representative-agent economy.", + month = sep, + year = 1993, + language = "en" +} + +@INCOLLECTION{Hornstein2005-td, + title = "The effects of technical change on labor market inequalities", + author = "Hornstein, Andreas and Krusell, Per and Violante, Giovanni L", + booktitle = "Handbook of Economic Growth", + publisher = "Elsevier", + pages = "1275--1370", + year = 2005 +} + +@ARTICLE{Heathcote2010-bj, + title = "The macroeconomic implications of rising wage inequality in the + United States", + author = "Heathcote, Jonathan and Storesletten, Kjetil and Violante, + Giovanni L", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 118, + number = 4, + pages = "681--722", + abstract = "In recent decades, American workers have faced a rising college + premium, a narrowing gender gap, and increasing wage volatility. + This paper explores the quantitative and welfare implications of + these changes. The framework is an incomplete-markets life cycle + model in which individuals choose education, intrafamily time + allocation, and savings. Given the observed history of the U.S. + wage structure, the model replicates key trends in + cross-sectional inequality in hours worked, earnings, and + consumption. Recent cohorts enjoy welfare gains, on average, as + higher relative wages for college graduates and for women + translate into higher educational attainment and a more even + division of labor within the household.", + month = aug, + year = 2010, + language = "en" +} + +@ARTICLE{Heathcote2005-ls, + title = "Fiscal policy with heterogeneous agents and incomplete markets", + author = "Heathcote, Jonathan", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 72, + number = 1, + pages = "161--188", + abstract = "I undertake a quantitative investigation into the short run + effects of changes in the timing of taxes for a model economy in + which heterogeneous households trade only one asset and face a + borrowing constraint. This asset market structure implies that + the consumption of low wealth households is sensitive to tax + changes. The main finding of the paper is that when the wealth + distribution in the model resembles that in the United States, + market incompleteness accounts for large immediate aggregate + consumption increases following tax cuts, and large consumption + falls following tax increases. When taxes are lump-sum, for + example, a dollar change in tax revenue is associated with a 15 + cent change in aggregate consumption, compared to a response of + roughly one third this size when markets are complete but + households are finitely-lived. I find the response to tax changes + to be larger if the interest rate is constant rather than + determined endogenously, and smaller if taxes are proportional + rather than lump-sum.", + month = jan, + year = 2005, + language = "en" +} + +@BOOK{Guerrieri2011-cv, + title = "Credit Crises, Precautionary Savings, Liquidity Trap. {NBER} Working + Paper 17583", + author = "Guerrieri, V and Lorenzoni, G", + year = 2011 +} + +@ARTICLE{Gabaix2009-kn, + title = "Power laws in economics and finance", + author = "Gabaix, Xavier", + journal = "Annu. Rev. Econom.", + publisher = "Annual Reviews", + volume = 1, + number = 1, + pages = "255--294", + abstract = "A power law (PL) is the form taken by a large number of + surprising empirical regularities in economics and finance. This + review surveys well-documented empirical PLs regarding income and + wealth, the size of cities and firms, stock market returns, + trading volume, international trade, and executive pay. It + reviews detail-independent theoretical motivations that make + sharp predictions concerning the existence and coefficients of + PLs, without requiring delicate tuning of model parameters. These + theoretical mechanisms include random growth, optimization, and + the economics of superstars, coupled with extreme value theory. + Some empirical regularities currently lack an appropriate + explanation. This article highlights these open areas for future + research.", + month = sep, + year = 2009, + language = "en" +} + +@ARTICLE{Fagereng2020-vt, + title = "Heterogeneity and persistence in returns to wealth", + author = "Fagereng, Andreas and Guiso, Luigi and Malacrino, Davide and + Pistaferri, Luigi", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 88, + number = 1, + pages = "115--170", + abstract = "We provide a systematic analysis of the properties of individual + returns to wealth using 12 years of population data from Norway's + administrative tax records. We document a number of novel + results. First, individuals earn markedly different average + returns on their net worth (a standard deviation of 22.1\%) and + on its components. Second, heterogeneity in returns does not + arise merely from differences in the allocation of wealth between + safe and risky assets: returns are heterogeneous even within + narrow asset classes. Third, returns are positively correlated + with wealth: moving from the 10th to the 90th percentile of the + net worth distribution increases the return by 18 percentage + points (and 10 percentage points if looking at net‐of‐tax + returns). Fourth, individual wealth returns exhibit substantial + persistence over time. We argue that while this persistence + partly arises from stable differences in risk exposure and assets + scale, it also reflects heterogeneity in sophistication and + financial information, as well as entrepreneurial talent. + Finally, wealth returns are correlated across generations. We + discuss the implications of these findings for several strands of + the wealth inequality debate.", + year = 2020, + language = "en" +} + +@ARTICLE{Cronqvist2015-lq, + title = "The origins of savings behavior", + author = "Cronqvist, Henrik and Siegel, Stephan", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 123, + number = 1, + pages = "123--169", + abstract = "What are the origins of individual savings behavior? Using data + on identical and fraternal twins matched with data on their + savings behavior, we find that an individual's savings propensity + is governed by both genetic predispositions, social transmission + from parents to their children, and gene-environment interplay + where certain environments moderate genetic influences. Genetic + variation explains about 35 percent of the variation in savings + rates across individuals, and this genetic effect is stronger in + less constraining, high socioeconomic status environments. + Parent-child transmission influences savings for young + individuals and those who grew up in a family environment with + less competition for parental resources. Individual-specific life + experiences is a very important explanation for behavior in the + savings domain, and strongest in urban communities. In a world + progressing rapidly towards individual retirement savings + autonomy, understanding the origins of individuals' savings + behavior are of key importance to economists as well as policy + makers.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Chatterjee1994-ch, + title = "Transitional dynamics and the distribution of wealth in a + neoclassical growth model", + author = "Chatterjee, Satyajit", + journal = "J. Public Econ.", + publisher = "Elsevier BV", + volume = 54, + number = 1, + pages = "97--119", + abstract = "The evolution of the personal distribution of wealth in a + standard neoclassical growth model is studied. If the economy is + growing toward the steady state and preferences are such that + marginal utility from consumption is infinite (finite) at some + (all) positive (non-negative) consumption level(s), then the + average saving propensity of agents is positively (negatively) + related to their wealth. If the economy is decaying toward the + steady state, these relationships are reversed. If wealth and + average saving propensity are positively (negatively) related, + the distribution of current period wealth Lorenz-dominates (is + Lorenz-dominated by) next period's distribution of wealth.", + month = may, + year = 1994, + language = "en" +} + +@ARTICLE{Castaneda2003-ow, + title = "Accounting for the {U}.s. earnings and wealth inequality", + author = "Castañeda, Ana and Díaz‐Giménez, Javier and Ríos‐Rull, + José‐víctor", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 4, + pages = "818--857", + abstract = "We show that a theory of earnings and wealth inequality, based on + the optimal choices of ex ante identical households that face + uninsured idiosyncratic shocks to their endowments of efficiency + labor units, accounts for the U.S. earnings and wealth inequality + almost exactly.", + month = aug, + year = 2003, + language = "en" +} + +@ARTICLE{Carroll1996-bk, + title = "On the concavity of the consumption function", + author = "Carroll, Christopher D and Kimball, Miles S", + journal = "Econometrica", + publisher = "JSTOR", + volume = 64, + number = 4, + pages = 981, + month = jul, + year = 1996 +} + +@BOOK{Carroll2012-uy, + title = "Theoretical Foundations Buffer Stock Saving", + author = "Carroll, C D", + year = 2012 +} + +@ARTICLE{Carroll2006-om, + title = "The method of endogenous gridpoints for solving dynamic + stochastic optimization problems", + author = "Carroll, Christopher D", + journal = "Econ. Lett.", + publisher = "Elsevier BV", + volume = 91, + number = 3, + pages = "312--320", + abstract = "This paper introduces a solution method for numerical dynamic + stochastic optimization problems that avoids rootfinding + operations. The idea is applicable to many microeconomic and + macroeconomic problems, including life cycle, buffer-stock, and + stochastic growth problems. Software is provided.", + month = jun, + year = 2006, + language = "en" +} + +@ARTICLE{Campbell2001-ir, + title = "Have individual stocks become more volatile? An empirical + exploration of idiosyncratic risk", + author = "Campbell, John Y and Lettau, Martin and Malkiel, Burton G and Xu, + Yexiao", + journal = "J. Finance", + publisher = "Wiley", + volume = 56, + number = 1, + pages = "1--43", + abstract = "ABSTRACTThis paper uses a disaggregated approach to study the + volatility of common stocks at the market, industry, and firm + levels. Over the period from 1962 to 1997 there has been a + noticeable increase in firm‐level volatility relative to market + volatility. Accordingly, correlations among individual stocks and + the explanatory power of the market model for a typical stock + have declined, whereas the number of stocks needed to achieve a + given level of diversification has increased. All the volatility + measures move together countercyclically and help to predict GDP + growth. Market volatility tends to lead the other volatility + series. Factors that may be responsible for these findings are + suggested.", + month = feb, + year = 2001, + language = "en" +} + +@ARTICLE{Campanale2007-fn, + title = "Increasing returns to savings and wealth inequality", + author = "Campanale, Claudio", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 10, + number = 4, + pages = "646--675", + abstract = "In this paper I present an explanation to the fact that in the + data wealth is substantially more concentrated than income. + Starting from the observation that the composition of households' + portfolios changes towards a larger share of high-yield assets as + the level of net worth increases, I first use data on historical + asset returns and portfolio composition by wealth level to + construct an empirical return function. I then augment an + Overlapping Generation version of the standard neoclassical + growth model with idiosyncratic labor income risk and missing + insurance markets to allow for returns on savings to be + increasing in the level of accumulated assets. The quantitative + properties of the model are examined and show that an empirically + plausible difference between the return faced by poor and wealthy + agents is able to generate a substantial increase in wealth + inequality compared to the basic model, enough to match the Gini + index and all but the top 1 percentile of the US distribution of + wealth.", + month = oct, + year = 2007, + language = "en" +} + +@ARTICLE{Cagetti2009-wg, + title = "Estate taxation, entrepreneurship, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 99, + number = 1, + pages = "85--111", + abstract = "This paper studies the estate tax in a quantitative framework + with business investment, borrowing constraints, estate + transmission, and wealth inequality. We find that the estate tax + has little effect on the saving and investment decisions of small + businesses, but does distort the decisions of larger firms, + thereby reducing aggregate output and savings. Removing such + distortions by eliminating the estate tax does not necessarily + imply that everyone would be better off. If other taxes were + raised to reestablish fiscal balance, those at the top of the + wealth distribution would experience a large welfare gain, but + most of the population would lose. (JEL D31, E21, H2)", + month = feb, + year = 2009, + language = "en" +} + +@ARTICLE{Cagetti2006-sz, + title = "Entrepreneurship, frictions, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 114, + number = 5, + pages = "835--870", + abstract = "This paper constructs and calibrates a parsimonious model of + occupational choice that allows for entrepreneurial entry, exit, + and investment decisions in the presence of borrowing + constraints. The model fits very well a number of empirical + observations, including the observed wealth distribution for + entrepreneurs and workers. At the aggregate level, more + restrictive borrowing constraints generate less wealth + concentration and reduce average firm size, aggregate capital, + and the fraction of entrepreneurs. Voluntary bequests allow some + high-ability workers to establish or enlarge an entrepreneurial + activity. With accidental bequests only, there would be fewer + very large firms and less aggregate capital and wealth + concentration.", + month = oct, + year = 2006, + language = "en" +} + +@ARTICLE{Brinca2016-fs, + title = "Fiscal multipliers in the {21st} century", + author = "Brinca, Pedro and Holter, Hans A and Krusell, Per and Malafry, + Laurence", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "53--69", + abstract = "Fiscal multipliers appear to vary greatly over time and space. + Based on VARs for a large number of countries, we document a + strong correlation between wealth inequality and the magnitude of + fiscal multipliers. In an attempt to account for this finding, we + develop a life-cycle, overlapping-generations economy with + uninsurable labor market risk. We calibrate our model to match + key characteristics of a number of OECD economies, including the + distribution of wages and wealth, social security, taxes, and + government debt and study how a fiscal multiplier depends on + various country characteristics. We find that the fiscal + multiplier is highly sensitive to the fraction of the population + who face binding credit constraints and also to the average + wealth level in the economy. These findings together help us + generate a cross-country pattern of multipliers that is quite + similar to that in the data.", + month = feb, + year = 2016, + language = "en" +} + +@ARTICLE{Bricker2016-xe, + title = "Measuring income and wealth at the top using administrative and + survey data", + author = "Bricker, Jesse and Henriques, Alice and Krimmel, Jacob and + Sabelhaus, John", + journal = "Brookings Pap. Econ. Act.", + publisher = "Johns Hopkins University Press", + volume = 2016, + number = 1, + pages = "261--331", + abstract = "Administrative tax data indicate that U.S. top income and wealth + shares are substantial and increasing rapidly (Piketty and Saez + 2003, Saez and Zucman 2014). A key reason for using + administrative data to measure top shares is to overcome the + under-representation of families at the very top that plagues + most household surveys. However, using tax records alone + restricts the unit of analysis for measuring economic resources, + limits the concepts of income and wealth being measured, and + imposes a rigid correlation between income and wealth. The Survey + of Consumer Finances (SCF) solves the under-representation + problem by combining administrative and survey data (Bricker et + al, 2014). Administrative records are used to select the SCF + sample and verify that high-end families are appropriately + represented, and the survey is designed to measure comprehensive + concepts of income and wealth at the family level. The SCF shows + high and rising top income and wealth shares, as in the ad + ministrative tax data. However, unadjusted, the levels and growth + based on administrative tax data alone appear to be substantially + larger. By constraining the SCF to be conceptually comparable, we + reconcile the differences, and show the extent to which + restrictions and rigidities needed to estimate top income and + wealth shares in the administrative data bias up levels and + growth rates.", + year = 2016 +} + +@ARTICLE{BewleyUnknown-yy, + title = "Interest Bearing Money Equilibrium Stock Capital", + author = "Bewley, T", + journal = "Manuscript" +} + +@ARTICLE{Benhabib2015-ed, + title = "The wealth distribution in Bewley economies with capital income + risk", + author = "Benhabib, Jess and Bisin, Alberto and Zhu, Shenghao", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 159, + pages = "489--515", + abstract = "We study the wealth distribution in Bewley economies with + idiosyncratic capital income risk. We show analytically that + under rather general conditions on the stochastic structure of + the economy, a unique ergodic distribution of wealth displays a + fat tail.", + month = sep, + year = 2015, + language = "en" +} + +@ARTICLE{Benhabib2011-hf, + title = "Distribution Wealth Fiscal Policy Economies Finitely Lived Agents", + author = "Benhabib, J and {Bisin} and Zhu, S", + journal = "Econometrica", + volume = 79, + number = 1, + pages = "123--157", + year = 2011 +} + +@ARTICLE{Benhabib2017-af, + title = "Earnings inequality and other determinants of wealth inequality", + author = "Benhabib, Jess and Bisin, Alberto and Luo, Mi", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 107, + number = 5, + pages = "593--597", + abstract = "We study the relation between the distribution of labor earnings + and the distribution of wealth. We show, theoretically as well as + empirically, that while labor earnings and precautionary savings + are important determinants of wealth inequality factors, they + cannot by themselves account for the thick tail of (the large top + shares in) the observed distribution of wealth. Other + determinants, like stochastic returns to wealth, as well as + savings rates and rates of returns increasing in wealth, need to + be accounted for.", + month = may, + year = 2017, + language = "en" +} + +@BOOK{Benhabib2015-rk, + title = "Wealth Distribution Social Mobility {US}: Quantitative Approach. + {NBER} Working Paper", + author = "Benhabib, J and {Bisin} and Luo, M", + year = 2015 +} + +@ARTICLE{Becker1980-pk, + title = "On the Long-Run steady state in a simple dynamic model of + equilibrium with heterogeneous households", + author = "Becker, Robert A", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 95, + number = 2, + pages = 375, + month = sep, + year = 1980 +} + +@ARTICLE{Bach2015-gh, + title = "Rich pickings? Risk, return, and skill in the portfolios of the + wealthy", + author = "Bach, Laurent and Calvet, Laurent E and Sodini, Paolo", + journal = "SSRN Electron. J.", + publisher = "Elsevier BV", + abstract = "This paper empirically investigates the portfolios of wealthy + households and their implications for the dynamics of inequality. + Using an administrative panel of all Swedish residents, we + document that returns on financial wealth are on average 4\% + higher per year for households in the top 1\% compared to the + median household. These high average returns are primarily + compensations for high levels of systematic risk. Abnormal + risk-adjusted returns, linked for instance to informational + advantages or exceptional investment skill, contribute only + marginally to the high returns of the wealthy. Implications for + inequality dynamics and public policy are discussed.", + year = 2015, + language = "en" +} + +@ARTICLE{Auclert2019-jm, + title = "Monetary policy and the redistribution channel", + author = "Auclert, Adrien", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 109, + number = 6, + pages = "2333--2367", + abstract = "This paper evaluates the role of redistribution in the + transmission mechanism of monetary policy to consumption. Three + channels affect aggregate spending when winners and losers have + different marginal propensities to consume: an earnings + heterogeneity channel from unequal income gains, a Fisher channel + from unexpected inflation, and an interest rate exposure channel + from real interest rate changes. Sufficient statistics from + Italian and US data suggest that all three channels are likely to + amplify the effects of monetary policy. (JEL E21, E31, E43, E52)", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{Aoki2017-nc, + title = "Zipf's law, Pareto's law, and the evolution of top incomes in the + United States", + author = "Aoki, Shuhei and Nirei, Makoto", + journal = "Am. Econ. J. Macroecon.", + publisher = "American Economic Association", + volume = 9, + number = 3, + pages = "36--71", + abstract = "We construct a tractable neoclassical growth model that generates + Pareto's law of income distribution and Zipf's law of the firm + size distribution from idiosyncratic, firm-level productivity + shocks. Executives and entrepreneurs invest in risk-free assets, + as well as their own firms' risky stocks, through which their + wealth and income depend on firm-level shocks. By using the + model, we evaluate how changes in tax rates can account for the + evolution of top incomes in the United States. The model matches + the decline in the Pareto exponent of the income distribution and + the trend of the top 1 percent income share in recent decades. + (JEL D31, H24, L11)", + month = jul, + year = 2017, + language = "en" +} + +@ARTICLE{Aiyagari1994-ka, + title = "Uninsured idiosyncratic risk and aggregate saving", + author = "Aiyagari, S R", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 109, + number = 3, + pages = "659--684", + abstract = "We present a qualitative and quantitative analysis of the + standard growth model modified to include precautionary saving + motives and liquidity constraints. We address the impact on the + aggregate saving rate, the importance of asset trading to + individuals, and the relative inequality of wealth and income + distributions.", + month = aug, + year = 1994, + language = "en" +} + +@ARTICLE{Acemoglu2002-ry, + title = "Technical change, inequality, and the labor market", + author = "Acemoglu, Daron", + journal = "J. Econ. Lit.", + publisher = "American Economic Association", + volume = 40, + number = 1, + pages = "7--72", + abstract = "This essay discusses the effect of technical change on wage + inequality. I argue that the behavior of wages and returns to + schooling indicates that technical change has been skill-biased + during the past sixty years. Furthermore, the recent increase in + inequality is most likely due to an acceleration in skill bias. + In contrast to twentieth century developments, most technical + change during the nineteenth century appears to be + skill-replacing. I suggest that this is because the increased + supply of unskilled workers in the English cities made the + introduction of these technologies profitable. On the other hand, + the twentieth-century has been characterized by skill-biased + technical change because the rapid increase in the supply of + skilled workers has induced the development of + skill-complementary technologies. The recent acceleration in + skill bias is in turn likely to have been a response to the + acceleration in the supply of skills during the past several + decades.", + month = mar, + year = 2002 +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/references.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/references.bib new file mode 100644 index 00000000..b6e86764 --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/references.bib @@ -0,0 +1,1351 @@ +@ARTICLE{Toda2019-kd, + title = "Wealth distribution with random discount factors", + author = "Toda, Alexis Akira", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 104, + pages = "101--113", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{Stiglitz1969-hx, + title = "Distribution of income and wealth among individuals", + author = "Stiglitz, J E", + journal = "Econometrica", + publisher = "JSTOR", + volume = 37, + number = 3, + pages = 382, + month = aug, + year = 1969 +} + +@ARTICLE{BewleyUnknown-yy, + title = "Interest Bearing Money Equilibrium Stock Capital", + author = "Bewley, T", + journal = "Manuscript" +} + +@ARTICLE{Quadrini2000-yd, + title = "Entrepreneurship, saving, and social mobility", + author = "Quadrini, Vincenzo", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 3, + number = 1, + pages = "1--40", + month = jan, + year = 2000, + language = "en" +} + +@BOOK{Carroll2012-uy, + title = "Theoretical Foundations Buffer Stock Saving", + author = "Carroll, C D", + year = 2012 +} + +@ARTICLE{Unknown2016-bh, + title = "Office Tax Analysis: Taxes Paid Capital Gains Returns Positive Net + Capital Gains", + pages = "1954--2014", + year = 2016 +} + + +@ARTICLE{Krusell2009-jt, + title = "Revisiting the welfare effects of eliminating business cycles", + author = "Krusell, Per and Mukoyama, Toshihiko and Şahin, Ayşegül and + Smith, Jr, Anthony A", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 12, + number = 3, + pages = "393--404", + abstract = "We investigate the welfare effects of eliminating business cycles + in a model with substantial consumer heterogeneity. The + heterogeneity arises from uninsurable and idiosyncratic + uncertainty in preferences and employment status. We calibrate + the model to match the distribution of wealth in U.S. data and + features of transitions between employment and unemployment. In + comparison with much of the literature, we find rather large + effects. For our benchmark model, we find welfare effects that, + on average across all consumers, are of a bit more than one order + of magnitude larger than those computed by Lucas [Lucas Jr., + R.E., 1987. Models of Business Cycles. Basil Blackwell, New + York]. When we distinguish long- from short-term unemployment, + long-term unemployment being distinguished by poor (and highly + procyclical) employment prospects and low unemployment + compensation, the average gain from eliminating cycles is as much + as 1\% in consumption equivalents. In addition, in both models, + there are large differences across groups: very poor consumers + gain a lot when cycles are removed (the long-term unemployed as + much as around 30\%), as do very rich consumers, whereas the + majority of consumers—the “middle class”—sees much smaller gains + from removing cycles. Inequality also rises substantially upon + removing cycles.", + month = jul, + year = 2009, + language = "en" +} + +@INCOLLECTION{Piketty2015-mp, + title = "Wealth and inheritance in the Long Run", + author = "Piketty, Thomas and Zucman, Gabriel", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1303--1368", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Krusell2015-ml, + title = "Piketty's Second Law Capitalism Fundamental?", + author = "Krusell, P", + journal = "Journal Political Economy", + volume = 123, + number = 4, + pages = "725--748", + year = 2015 +} + +@ARTICLE{Kesten1973-qv, + title = "Random difference equations and Renewal theory for products of + random matrices", + author = "Kesten, Harry", + journal = "Acta Math.", + publisher = "International Press of Boston", + volume = 131, + number = 0, + pages = "207--248", + year = 1973, + language = "en" +} + +@ARTICLE{Kennickell2017-fa, + title = "Tossed and turned: Wealth dynamics of {U}.{S}. households + 2007-2009", + author = "Kennickell, Arthur B", + journal = "Stat. J. IAOS", + publisher = "SAGE Publications", + volume = 33, + number = 1, + pages = "175--183", + month = mar, + year = 2017 +} + +@ARTICLE{Katz1992-yc, + title = "Changes in relative wages, 1963-1987: Supply and demand factors", + author = "Katz, L F and Murphy, K M", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 107, + number = 1, + pages = "35--78", + month = feb, + year = 1992 +} + +@BOOK{Karabarbounis2014-xe, + title = "Capital Depreciation Labor Shares Around World: Measurement + Implications", + author = "Karabarbounis, L and Neiman, B", + year = 2014 +} + +@ARTICLE{Gagnon2014-ko, + title = "Piketty, {T}. (2014), capital in the twenty-first century + (translated by Arthur Goldhammer), the Belknap press of Harvard + university press, Cambridge, mass. 685 p", + author = "Gagnon, Jean-Marie", + journal = "Actual. Econ.", + publisher = "Consortium Erudit", + volume = 90, + number = 4, + pages = 329, + year = 2014 +} + +@INCOLLECTION{Piazzesi2016-no, + title = "Housing and macroeconomics", + author = "Piazzesi, M and Schneider, M", + booktitle = "Handbook of Macroeconomics", + publisher = "Elsevier", + pages = "1547--1640", + series = "Handbook of Macroeconomics", + year = 2016, + language = "en" +} + +@ARTICLE{Carroll1996-bk, + title = "On the concavity of the consumption function", + author = "Carroll, Christopher D and Kimball, Miles S", + journal = "Econometrica", + publisher = "JSTOR", + volume = 64, + number = 4, + pages = 981, + month = jul, + year = 1996 +} + +@BOOK{Guerrieri2011-cv, + title = "Credit Crises, Precautionary Savings, Liquidity Trap. {NBER} Working + Paper 17583", + author = "Guerrieri, V and Lorenzoni, G", + year = 2011 +} + +@ARTICLE{Piketty1997-dn, + title = "The dynamics of the wealth distribution and the interest rate + with credit rationing", + author = "Piketty, Thomas", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 64, + number = 2, + pages = 173, + abstract = "With decreasing returns and first-best credit, the long-run + interest rate and aggregate output are uniquely determined, and + wealth dispersion among individuals or firms is irrelevant. + Introducing credit rationing into the Solow model modifies these + conclusions. Multiple stationary interest rates and wealth + distributions can exist because higher initial rates can be + self-reinforcing through higher credit rationing and lower + capital accumulation. The wealth accumulation process is ergodic + in every steady state, but wealth mobility is lower with higher + steady-state interest rates. Aggregate output is higher in steady + states with lower interest rates because credit is better + allocated. Short-run interest rate or distribution shocks can be + self-sustaining and can have long-run effects on output through + the induced dynamics of the wealth distribution and credit + rationing.", + month = apr, + year = 1997 +} + +@ARTICLE{Carroll2006-om, + title = "The method of endogenous gridpoints for solving dynamic + stochastic optimization problems", + author = "Carroll, Christopher D", + journal = "Econ. Lett.", + publisher = "Elsevier BV", + volume = 91, + number = 3, + pages = "312--320", + abstract = "This paper introduces a solution method for numerical dynamic + stochastic optimization problems that avoids rootfinding + operations. The idea is applicable to many microeconomic and + macroeconomic problems, including life cycle, buffer-stock, and + stochastic growth problems. Software is provided.", + month = jun, + year = 2006, + language = "en" +} + +@ARTICLE{Cagetti2009-wg, + title = "Estate taxation, entrepreneurship, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 99, + number = 1, + pages = "85--111", + abstract = "This paper studies the estate tax in a quantitative framework + with business investment, borrowing constraints, estate + transmission, and wealth inequality. We find that the estate tax + has little effect on the saving and investment decisions of small + businesses, but does distort the decisions of larger firms, + thereby reducing aggregate output and savings. Removing such + distortions by eliminating the estate tax does not necessarily + imply that everyone would be better off. If other taxes were + raised to reestablish fiscal balance, those at the top of the + wealth distribution would experience a large welfare gain, but + most of the population would lose. (JEL D31, E21, H2)", + month = feb, + year = 2009, + language = "en" +} + +@BOOK{Benhabib2015-rk, + title = "Wealth Distribution Social Mobility {US}: Quantitative Approach. + {NBER} Working Paper", + author = "Benhabib, J and {Bisin} and Luo, M", + year = 2015 +} + +@ARTICLE{Aoki2017-nc, + title = "Zipf's law, Pareto's law, and the evolution of top incomes in the + United States", + author = "Aoki, Shuhei and Nirei, Makoto", + journal = "Am. Econ. J. Macroecon.", + publisher = "American Economic Association", + volume = 9, + number = 3, + pages = "36--71", + abstract = "We construct a tractable neoclassical growth model that generates + Pareto's law of income distribution and Zipf's law of the firm + size distribution from idiosyncratic, firm-level productivity + shocks. Executives and entrepreneurs invest in risk-free assets, + as well as their own firms' risky stocks, through which their + wealth and income depend on firm-level shocks. By using the + model, we evaluate how changes in tax rates can account for the + evolution of top incomes in the United States. The model matches + the decline in the Pareto exponent of the income distribution and + the trend of the top 1 percent income share in recent decades. + (JEL D31, H24, L11)", + month = jul, + year = 2017, + language = "en" +} + +@ARTICLE{Nirei2016-ya, + title = "Pareto distribution of income in neoclassical growth models", + author = "Nirei, Makoto and Aoki, Shuhei", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 20, + pages = "25--42", + abstract = "We construct a neoclassical growth model with heterogeneous + households that accounts for the Pareto distributions of income + and wealth in the upper tail. In an otherwise standard Bewley + model, we feature households' business productivity risks and + borrowing constraints, which we find generate the Pareto + distributions. Households with low productivity rely on wages and + returns from safe assets, while high productivity households + choose not to diversify their business risks. The model can + quantitatively account for the observed income distribution in + the U.S. under reasonable calibrations. Furthermore, we conduct + several comparative statics to examine how changes in parameters + affect the Pareto distributions. In particular, we find that the + change in the top tax rates in the 1980s potentially accounts for + much of the observed increase in top income dispersion in the + last decades. Our analytical result provides a coherent + interpretation for the numerical comparative statics.", + month = apr, + year = 2016, + language = "en" +} + +@ARTICLE{Kartashova2014-ca, + title = "Private equity premium puzzle revisited", + author = "Kartashova, Katya", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 104, + number = 10, + pages = "3297--3334", + abstract = "This paper revisits the results of Moskowitz and + Vissing-Jørgensen (2002) on returns to entrepreneurial + investments in the United States. Following the authors' + methodology and new data from the Survey of Consumer Finances, I + find that the “private equity premium puzzle” does not survive + the period of high public equity returns in the 1990s. The + difference between private and public equity returns is positive + and large period-by-period between 1999 and 2007. Whereas in the + 2008–2010 period, overlapping with the Great Recession, public + and private equities performances are substantially closer. I + validate these results in the aggregate data going back to the + 1960s. (JEL G11, G12, L26)", + month = oct, + year = 2014, + language = "en" +} + +@ARTICLE{Benhabib2017-af, + title = "Earnings inequality and other determinants of wealth inequality", + author = "Benhabib, Jess and Bisin, Alberto and Luo, Mi", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 107, + number = 5, + pages = "593--597", + abstract = "We study the relation between the distribution of labor earnings + and the distribution of wealth. We show, theoretically as well as + empirically, that while labor earnings and precautionary savings + are important determinants of wealth inequality factors, they + cannot by themselves account for the thick tail of (the large top + shares in) the observed distribution of wealth. Other + determinants, like stochastic returns to wealth, as well as + savings rates and rates of returns increasing in wealth, need to + be accounted for.", + month = may, + year = 2017, + language = "en" +} + +@ARTICLE{Benhabib2015-ed, + title = "The wealth distribution in Bewley economies with capital income + risk", + author = "Benhabib, Jess and Bisin, Alberto and Zhu, Shenghao", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 159, + pages = "489--515", + abstract = "We study the wealth distribution in Bewley economies with + idiosyncratic capital income risk. We show analytically that + under rather general conditions on the stochastic structure of + the economy, a unique ergodic distribution of wealth displays a + fat tail.", + month = sep, + year = 2015, + language = "en" +} + +@ARTICLE{McKay2016-qy, + title = "The power of forward guidance revisited", + author = "McKay, Alisdair and Nakamura, Emi and Steinsson, Jón", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 106, + number = 10, + pages = "3133--3158", + abstract = "In recent years, central banks have increasingly turned to + forward guidance as a central tool of monetary policy. Standard + monetary models imply that far future forward guidance has huge + effects on current outcomes, and these effects grow with the + horizon of the forward guidance. We present a model in which the + power of forward guidance is highly sensitive to the assumption + of complete markets. When agents face uninsurable income risk and + borrowing constraints, a precautionary savings effect tempers + their responses to changes in future interest rates. As a + consequence, forward guidance has substantially less power to + stimulate the economy. (JEL E21, E40, E50)", + month = oct, + year = 2016, + language = "en" +} + +@ARTICLE{Campbell2001-ir, + title = "Have individual stocks become more volatile? An empirical + exploration of idiosyncratic risk", + author = "Campbell, John Y and Lettau, Martin and Malkiel, Burton G and Xu, + Yexiao", + journal = "J. Finance", + publisher = "Wiley", + volume = 56, + number = 1, + pages = "1--43", + abstract = "ABSTRACTThis paper uses a disaggregated approach to study the + volatility of common stocks at the market, industry, and firm + levels. Over the period from 1962 to 1997 there has been a + noticeable increase in firm‐level volatility relative to market + volatility. Accordingly, correlations among individual stocks and + the explanatory power of the market model for a typical stock + have declined, whereas the number of stocks needed to achieve a + given level of diversification has increased. All the volatility + measures move together countercyclically and help to predict GDP + growth. Market volatility tends to lead the other volatility + series. Factors that may be responsible for these findings are + suggested.", + month = feb, + year = 2001, + language = "en" +} + +@ARTICLE{Toda2014-py, + title = "Incomplete market dynamics and cross-sectional distributions", + author = "Toda, Alexis Akira", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 154, + pages = "310--348", + abstract = "The size distributions of many economic variables seem to obey + the double power law, that is, the power law holds in both the + upper and the lower tails. I explain this emergence of the double + power law—which has important economic, econometric, and social + implications—using a tractable dynamic stochastic general + equilibrium model with heterogeneous agents subject to aggregate + and idiosyncratic investment risks. I establish theoretical + properties such as existence, uniqueness, and constrained + efficiency of equilibrium, and provide a numerical algorithm that + is guaranteed to converge. The model is widely applicable: it + allows for arbitrary homothetic CRRA recursive preferences, an + arbitrary Markov process governing aggregate shocks, and an + arbitrary number of technologies and assets with arbitrary + portfolio constraints.", + month = nov, + year = 2014, + language = "en" +} + +@ARTICLE{Benhabib2011-hf, + title = "Distribution wealth fiscal policy economies finitely lived agents", + author = "Benhabib, J and {Bisin} and Zhu, S", + journal = "Econometrica", + volume = 79, + number = 1, + pages = "123--157", + year = 2011 +} + +@ARTICLE{Becker1980-pk, + title = "On the Long-Run steady state in a simple dynamic model of + equilibrium with heterogeneous households", + author = "Becker, Robert A", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 95, + number = 2, + pages = 375, + month = sep, + year = 1980 +} + +@ARTICLE{Bach2015-gh, + title = "Rich pickings? Risk, return, and skill in the portfolios of the + wealthy", + author = "Bach, Laurent and Calvet, Laurent E and Sodini, Paolo", + journal = "SSRN Electron. J.", + publisher = "Elsevier BV", + abstract = "This paper empirically investigates the portfolios of wealthy + households and their implications for the dynamics of inequality. + Using an administrative panel of all Swedish residents, we + document that returns on financial wealth are on average 4\% + higher per year for households in the top 1\% compared to the + median household. These high average returns are primarily + compensations for high levels of systematic risk. Abnormal + risk-adjusted returns, linked for instance to informational + advantages or exceptional investment skill, contribute only + marginally to the high returns of the wealthy. Implications for + inequality dynamics and public policy are discussed.", + year = 2015, + language = "en" +} + +@ARTICLE{Chatterjee1994-ch, + title = "Transitional dynamics and the distribution of wealth in a + neoclassical growth model", + author = "Chatterjee, Satyajit", + journal = "J. Public Econ.", + publisher = "Elsevier BV", + volume = 54, + number = 1, + pages = "97--119", + abstract = "The evolution of the personal distribution of wealth in a + standard neoclassical growth model is studied. If the economy is + growing toward the steady state and preferences are such that + marginal utility from consumption is infinite (finite) at some + (all) positive (non-negative) consumption level(s), then the + average saving propensity of agents is positively (negatively) + related to their wealth. If the economy is decaying toward the + steady state, these relationships are reversed. If wealth and + average saving propensity are positively (negatively) related, + the distribution of current period wealth Lorenz-dominates (is + Lorenz-dominated by) next period's distribution of wealth.", + month = may, + year = 1994, + language = "en" +} + +@ARTICLE{Piketty1995-ml, + title = "Social Mobility and Redistributive Politics", + author = "Piketty, T", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 110, + number = 3, + pages = "551--584", + abstract = "Just like economists, voters have conflicting views about + redistributive taxation because they estimate its incentive costs + differently. We model rational agents as trying to learn from + their dynastic income mobility experience the relative importance + of effort and predetermined factors in the generation of income + inequality and therefore the magnitude of these incentive costs. + In the long run, ``left-wing dynasties'' believing less in + individual effort and voting for more redistribution coexist with + ``right-wing dynasties.'' This allows us to explain why + individual mobility experience and not only current income + matters for political attiitudes and how persistent differences + in perceptions about social mobility can generate persistent + differences in redistribution across countries.", + month = aug, + year = 1995 +} + +@ARTICLE{Gabaix2009-kn, + title = "Power laws in economics and finance", + author = "Gabaix, Xavier", + journal = "Annu. Rev. Econom.", + publisher = "Annual Reviews", + volume = 1, + number = 1, + pages = "255--294", + abstract = "A power law (PL) is the form taken by a large number of + surprising empirical regularities in economics and finance. This + review surveys well-documented empirical PLs regarding income and + wealth, the size of cities and firms, stock market returns, + trading volume, international trade, and executive pay. It + reviews detail-independent theoretical motivations that make + sharp predictions concerning the existence and coefficients of + PLs, without requiring delicate tuning of model parameters. These + theoretical mechanisms include random growth, optimization, and + the economics of superstars, coupled with extreme value theory. + Some empirical regularities currently lack an appropriate + explanation. This article highlights these open areas for future + research.", + month = sep, + year = 2009, + language = "en" +} + +@ARTICLE{Heathcote2010-bj, + title = "The macroeconomic implications of rising wage inequality in the + United States", + author = "Heathcote, Jonathan and Storesletten, Kjetil and Violante, + Giovanni L", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 118, + number = 4, + pages = "681--722", + abstract = "In recent decades, American workers have faced a rising college + premium, a narrowing gender gap, and increasing wage volatility. + This paper explores the quantitative and welfare implications of + these changes. The framework is an incomplete-markets life cycle + model in which individuals choose education, intrafamily time + allocation, and savings. Given the observed history of the U.S. + wage structure, the model replicates key trends in + cross-sectional inequality in hours worked, earnings, and + consumption. Recent cohorts enjoy welfare gains, on average, as + higher relative wages for college graduates and for women + translate into higher educational attainment and a more even + division of labor within the household.", + month = aug, + year = 2010, + language = "en" +} + +@ARTICLE{Mehra1985-rw, + title = "The equity premium: A puzzle", + author = "Mehra, Rajnish and Prescott, Edward C", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 15, + number = 2, + pages = "145--161", + abstract = "Restrictions that a class of general equilibrium models place + upon the average returns of equity and Treasury bills are found + to be strongly violated by the U.S. data in the 1889–1978 period. + This result is robust to model specification and measurement + problems. We conclude that, most likely, an equilibrium model + which is not an Arrow-Debreu economy will be the one that + simultaneously rationalizes both historically observed large + average equity return and the small average risk-free return.", + month = mar, + year = 1985, + language = "en" +} + +@ARTICLE{Acemoglu2002-ry, + title = "Technical change, inequality, and the labor market", + author = "Acemoglu, Daron", + journal = "J. Econ. Lit.", + publisher = "American Economic Association", + volume = 40, + number = 1, + pages = "7--72", + abstract = "This essay discusses the effect of technical change on wage + inequality. I argue that the behavior of wages and returns to + schooling indicates that technical change has been skill-biased + during the past sixty years. Furthermore, the recent increase in + inequality is most likely due to an acceleration in skill bias. + In contrast to twentieth century developments, most technical + change during the nineteenth century appears to be + skill-replacing. I suggest that this is because the increased + supply of unskilled workers in the English cities made the + introduction of these technologies profitable. On the other hand, + the twentieth-century has been characterized by skill-biased + technical change because the rapid increase in the supply of + skilled workers has induced the development of + skill-complementary technologies. The recent acceleration in + skill bias is in turn likely to have been a response to the + acceleration in the supply of skills during the past several + decades.", + month = mar, + year = 2002 +} + +@ARTICLE{Kaymak2016-wg, + title = "The evolution of wealth inequality over half a century: The role + of taxes, transfers and technology", + author = "Kaymak, Barış and Poschke, Markus", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "1--25", + abstract = "Over the last 50 years the U.S. tax system went through a + striking transformation that reduced the effective tax rates for + top income groups and raised transfers to seniors. This paper + investigates the macroeconomic repercussions of this change in + policy, particularly for the distributions of income, wealth and + consumption. Changes in taxes and transfers account for nearly + half of the rise in wealth concentration. Nonetheless, their + impact on the distributions of income and consumption has been + minor due to changes in equilibrium prices and the offsetting + effects of tax cuts and transfers on the dispersion of + consumption. Results highlight the role of increasing wage + dispersion during this period as the main driver of trends in + inequality.", + month = feb, + year = 2016, + language = "en" +} + +@ARTICLE{Auclert2019-jm, + title = "Monetary policy and the redistribution channel", + author = "Auclert, Adrien", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 109, + number = 6, + pages = "2333--2367", + abstract = "This paper evaluates the role of redistribution in the + transmission mechanism of monetary policy to consumption. Three + channels affect aggregate spending when winners and losers have + different marginal propensities to consume: an earnings + heterogeneity channel from unequal income gains, a Fisher channel + from unexpected inflation, and an interest rate exposure channel + from real interest rate changes. Sufficient statistics from + Italian and US data suggest that all three channels are likely to + amplify the effects of monetary policy. (JEL E21, E31, E43, E52)", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{GabaixUnknown-mc, + title = "The Dynamics of Inequality", + author = "Gabaix, Xavier and Lasry, Jean-Michel and Lions, Pierre-Louis and + Moll, Benjamin", + abstract = "The past forty years have seen a rapid rise in top income + inequality in the United States. While there is a large number of + existing theories of the Pareto tail of the long-run income + distributions, almost none of these address the fast rise in top + inequality observed in the data. We show that standard theories, + which build on a random growth mechanism, generate transition + dynamics that are an order of magnitude too slow relative to those + observed in the data. We then suggest two parsimonious deviations + from the canonical model that can explain such changes: ``scale + dependence'' that may arise from changes in skill prices, and + ``type dependence,'' i.e. the presence of some ``high-growth + types.'' These deviations are consistent with theories in which + the increase in top income inequality is driven by the rise of + ``superstar'' entrepreneurs or managers." +} + +@ARTICLE{Stachurski2018-pa, + title = "An impossibility theorem for wealth in heterogeneous-agent + models with limited heterogeneity", + author = "Stachurski, John and Toda, Alexis Akira", + journal = "arXiv [econ.GN]", + abstract = "It has been conjectured that canonical + Bewley--Huggett--Aiyagari heterogeneous-agent models cannot + explain the joint distribution of income and wealth. The + results stated below verify this conjecture and clarify its + implications under very general conditions. We show in + particular that if (i) agents are infinitely-lived, (ii) + saving is risk-free, and (iii) agents have constant discount + factors, then the wealth distribution inherits the tail + behavior of income shocks (e.g., light-tailedness or the + Pareto exponent). Our restrictions on utility require only + that relative risk aversion is bounded, and a large variety + of income processes are admitted. Our results show + conclusively that it is necessary to go beyond standard + models to explain the empirical fact that wealth is + heavier-tailed than income. We demonstrate through examples + that relaxing any of the above three conditions can generate + Pareto tails.", + month = jul, + year = 2018, + archivePrefix = "arXiv", + primaryClass = "econ.GN" +} + +@ARTICLE{Aiyagari1994-ka, + title = "Uninsured idiosyncratic risk and aggregate saving", + author = "Aiyagari, S R", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 109, + number = 3, + pages = "659--684", + abstract = "We present a qualitative and quantitative analysis of the + standard growth model modified to include precautionary saving + motives and liquidity constraints. We address the impact on the + aggregate saving rate, the importance of asset trading to + individuals, and the relative inequality of wealth and income + distributions.", + month = aug, + year = 1994, + language = "en" +} + +@ARTICLE{Castaneda2003-ow, + title = "Accounting for the {U}.s. earnings and wealth inequality", + author = "Castañeda, Ana and Díaz‐Giménez, Javier and Ríos‐Rull, + José‐víctor", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 4, + pages = "818--857", + abstract = "We show that a theory of earnings and wealth inequality, based on + the optimal choices of ex ante identical households that face + uninsured idiosyncratic shocks to their endowments of efficiency + labor units, accounts for the U.S. earnings and wealth inequality + almost exactly.", + month = aug, + year = 2003, + language = "en" +} + +@ARTICLE{Piketty2003-zj, + title = "Income Inequality in France, {1901–1998}", + author = "Piketty, Thomas", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 5, + pages = "1004--1042", + abstract = "The objective of this research is to document and to explain + trends in inequality in 20th century France. Data from income tax + returns (1915-98), wage tax returns (1919-98) and inheritance tax + returns (1902-94), is used in order to compute fully homogeneous, + yearly estimates of income inequality, wage inequality and wealth + inequality. The main conclusion is that the decline in income + inequality that took place during the first half of the 20th + century was mostly accidental. In France and possibly in a number + of other developed countries as well wage inequality has actually + been extremely stable in the long run, and the secular decline in + income inequality is for the most part a capital income + phenomenon. Holders of very large fortunes were severely hit by + major shocks during the 1914-45 period, and were never able to + fully recover from these shocks, probably because of the dynamic + effects of progressive taxation on capital accumulation and + pre-tax income inequality.", + month = oct, + year = 2003 +} + +@ARTICLE{Huggett1993-af, + title = "The risk-free rate in heterogeneous-agent incomplete-insurance + economies", + author = "Huggett, Mark", + journal = "J. Econ. Dyn. Control", + publisher = "Elsevier BV", + volume = 17, + number = "5-6", + pages = "953--969", + abstract = "Why has the average real risk-free interest rate been less than + one percent? The question is motivated by the failure of a class + of calibrated representative-agent economies to explain the + average return to equity and risk-free debt. I construct an + economy where agents experience uninsurable idiosyncratic + endowment shocks and smooth consumption by holding a risk-free + asset. I calibrate the economy and characterize equilibria + computationally. With a borrowing constraint of one year's + income, the resulting risk-free rate is more than one percent + below the rate in the comparable representative-agent economy.", + month = sep, + year = 1993, + language = "en" +} + +@ARTICLE{Cagetti2006-sz, + title = "Entrepreneurship, frictions, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 114, + number = 5, + pages = "835--870", + abstract = "This paper constructs and calibrates a parsimonious model of + occupational choice that allows for entrepreneurial entry, exit, + and investment decisions in the presence of borrowing + constraints. The model fits very well a number of empirical + observations, including the observed wealth distribution for + entrepreneurs and workers. At the aggregate level, more + restrictive borrowing constraints generate less wealth + concentration and reduce average firm size, aggregate capital, + and the fraction of entrepreneurs. Voluntary bequests allow some + high-ability workers to establish or enlarge an entrepreneurial + activity. With accidental bequests only, there would be fewer + very large firms and less aggregate capital and wealth + concentration.", + month = oct, + year = 2006, + language = "en" +} + +@ARTICLE{Krusell1998-cr, + title = "Income and wealth heterogeneity in the macroeconomy", + author = "Krusell, Per and Smith, Jr, Anthony A", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 106, + number = 5, + pages = "867--896", + abstract = "How do movements in the distribution of income and wealth affect + the macroeconomy? We analyze this question theoretically, using + numerical methods, in the context of a calibrated version of the + stochastic growth model with partially uninsurable idiosyncratic + risk and movements in aggregate productivity.", + month = oct, + year = 1998 +} + +@ARTICLE{Karabarbounis2014-el, + title = "The global decline of the labor share", + author = "Karabarbounis, Loukas and Neiman, Brent", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 129, + number = 1, + pages = "61--103", + abstract = "AbstractThe stability of the labor share of income is a key + foundation in macroeconomic models. We document, however, that + the global labor share has significantly declined since the early + 1980s, with the decline occurring within the large majority of + countries and industries. We show that the decrease in the + relative price of investment goods, often attributed to advances + in information technology and the computer age, induced firms to + shift away from labor and toward capital. The lower price of + investment goods explains roughly half of the observed decline in + the labor share, even when we allow for other mechanisms + influencing factor shares, such as increasing profits, + capital-augmenting technology growth, and the changing skill + composition of the labor force. We highlight the implications of + this explanation for welfare and macroeconomic dynamics.", + month = feb, + year = 2014, + language = "en" +} + +@INCOLLECTION{Krusell2013-tv, + title = "Quantitative macroeconomic models with heterogeneous agents", + author = "Krusell, Per and Smith, Jr, Anthony A", + editor = "Blundell, Richard and Newey, Whitney K and Persson, Torsten", + booktitle = "Advances in Economics and Econometrics", + publisher = "Cambridge University Press", + address = "Cambridge", + pages = "298--340", + year = 2013 +} + +@ARTICLE{Bricker2015-lk, + title = "Measuring income and wealth at the top using administrative and + survey data", + author = "Bricker, Jesse and Henriques, Alice and Krimmel, Jacob and + Sabelhaus, John", + journal = "SSRN Electron. J.", + publisher = "Elsevier BV", + volume = 2016, + number = 1, + pages = "261--331", + abstract = "Administrative tax data indicate that U.S. top income and wealth + shares are substantial and increasing rapidly (Piketty and Saez + 2003, Saez and Zucman 2014). A key reason for using + administrative data to measure top shares is to overcome the + under-representation of families at the very top that plagues + most household surveys. However, using tax records alone + restricts the unit of analysis for measuring economic resources, + limits the concepts of income and wealth being measured, and + imposes a rigid correlation between income and wealth. The Survey + of Consumer Finances (SCF) solves the under-representation + problem by combining administrative and survey data (Bricker et + al, 2014). Administrative records are used to select the SCF + sample and verify that high-end families are appropriately + represented, and the survey is designed to measure comprehensive + concepts of income and wealth at the family level. The SCF shows + high and rising top income and wealth shares, as in the ad + ministrative tax data. However, unadjusted, the levels and growth + based on administrative tax data alone appear to be substantially + larger. By constraining the SCF to be conceptually comparable, we + reconcile the differences, and show the extent to which + restrictions and rigidities needed to estimate top income and + wealth shares in the administrative data bias up levels and + growth rates.", + year = 2015 +} + +@ARTICLE{Fagereng2020-vt, + title = "Heterogeneity and persistence in returns to wealth", + author = "Fagereng, Andreas and Guiso, Luigi and Malacrino, Davide and + Pistaferri, Luigi", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 88, + number = 1, + pages = "115--170", + abstract = "We provide a systematic analysis of the properties of individual + returns to wealth using 12 years of population data from Norway's + administrative tax records. We document a number of novel + results. First, individuals earn markedly different average + returns on their net worth (a standard deviation of 22.1\%) and + on its components. Second, heterogeneity in returns does not + arise merely from differences in the allocation of wealth between + safe and risky assets: returns are heterogeneous even within + narrow asset classes. Third, returns are positively correlated + with wealth: moving from the 10th to the 90th percentile of the + net worth distribution increases the return by 18 percentage + points (and 10 percentage points if looking at net‐of‐tax + returns). Fourth, individual wealth returns exhibit substantial + persistence over time. We argue that while this persistence + partly arises from stable differences in risk exposure and assets + scale, it also reflects heterogeneity in sophistication and + financial information, as well as entrepreneurial talent. + Finally, wealth returns are correlated across generations. We + discuss the implications of these findings for several strands of + the wealth inequality debate.", + year = 2020, + language = "en" +} + +@ARTICLE{Kopczuk2015-zp, + title = "What do we know about the evolution of top wealth shares in the + United States?", + author = "Kopczuk, Wojciech", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 29, + number = 1, + pages = "47--66", + abstract = "I discuss available evidence about the evolution of top wealth + shares in the United States over the course of the 20th century. + The three main approaches—the Survey of Consumer Finances, estate + tax multiplier, and capitalization methods—generate generally + consistent findings until mid-1980s but diverge since then, with + the capitalization method showing a dramatic increase in wealth + concentration and the other two methods showing at best a small + increase. I discuss strengths and weaknesses of different + approaches. The increase in capitalization estimates since 2000 + is driven by a dramatic and puzzling increase in fixed income + assets. There is evidence that estate tax estimates may not be + sufficiently accounting for mortality improvements over time. The + nonresponse and coverage issues in the SCF are a concern. I + conclude that the changing nature of top incomes and the + increased importance of self-made wealth may explain difficulties + in implementing each of the methods and why the results diverge.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Kaplan2018-sr, + title = "Monetary policy according to {HANK}", + author = "Kaplan, Greg and Moll, Benjamin and Violante, Giovanni L", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 108, + number = 3, + pages = "697--743", + abstract = "We revisit the transmission mechanism from monetary policy to + household consumption in a Heterogeneous Agent New Keynesian + (HANK) model. The model yields empirically realistic + distributions of wealth and marginal propensities to consume + because of two features: uninsurable income shocks and multiple + assets with different degrees of liquidity and different returns. + In this environment, the indirect effects of an unexpected cut in + interest rates, which operate through a general equilibrium + increase in labor demand, far outweigh direct effects such as + intertemporal substitution. This finding is in stark contrast to + small- and medium-scale Representative Agent New Keynesian (RANK) + economies, where the substitution channel drives virtually all of + the transmission from interest rates to consumption. Failure of + Ricardian equivalence implies that, in HANK models, the fiscal + reaction to the monetary expansion is a key determinant of the + overall size of the macroeconomic response. (JEL D31, E12, E21, + E24, E43, E52, E62)", + month = mar, + year = 2018, + language = "en" +} + +@ARTICLE{Saez2016-zm, + title = "Wealth inequality in the United States since 1913: Evidence from + capitalized income tax data", + author = "Saez, Emmanuel and Zucman, Gabriel", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 131, + number = 2, + pages = "519--578", + abstract = "AbstractThis paper combines income tax returns with macroeconomic + household balance sheets to estimate the distribution of wealth + in the United States since 1913. We estimate wealth by + capitalizing the incomes reported by individual taxpayers, + accounting for assets that do not generate taxable income. We + successfully test our capitalization method in three micro + datasets where we can observe both income and wealth: the Survey + of Consumer Finance, linked estate and income tax returns, and + foundations’ tax records. We find that wealth concentration was + high in the beginning of the twentieth century, fell from 1929 to + 1978, and has continuously increased since then. The top 0.1\% + wealth share has risen from 7\% in 1978 to 22\% in 2012, a level + almost as high as in 1929. Top wealth-holders are younger today + than in the 1960s and earn a higher fraction of the economy’s + labor income. The bottom 90\% wealth share first increased up to + the mid-1980s and then steadily declined. The increase in wealth + inequality in recent decades is due to the upsurge of top incomes + combined with an increase in saving rate inequality. We explain + how our findings can be reconciled with Survey of Consumer + Finances and estate tax data.", + month = may, + year = 2016, + language = "en" +} + +@ARTICLE{Piketty2007-fo, + title = "How progressive is the {U}.s. federal tax system? A historical + and international perspective", + author = "Piketty, Thomas and Saez, Emmanuel", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 21, + number = 1, + pages = "3--24", + abstract = "This paper provides estimates of federal tax rates by income + groups in the United States since 1960, with special emphasis on + very top income groups. We include individual and corporate + income taxes, payroll taxes, and estate and gift taxes. The + progressivity of the U.S. federal tax system at the top of the + income distribution has declined dramatically since the 1960s. + This dramatic drop in progressivity is due primarily to a drop in + corporate taxes and in estate and gift taxes combined with a + sharp change in the composition of top incomes away from capital + income and toward labor income. The sharp drop in statutory top + marginal individual income tax rates has contributed only + moderately to the decline in tax progressivity. International + comparisons confirm that is it critical to take into account + other taxes than the individual income tax to properly assess the + extent of overall tax progressivity, both for time trends and for + cross-country comparisons. The pattern for the United Kingdom is + similar to the U.S. pattern. France had less progressive taxes + than the United States or the United Kingdom in 1970 but has + experienced an increase in tax progressivity and has now a more + progressive tax system than the United States or the United + Kingdom.", + month = jan, + year = 2007, + language = "en" +} + +@ARTICLE{Brinca2016-fs, + title = "Fiscal multipliers in the {21st} century", + author = "Brinca, Pedro and Holter, Hans A and Krusell, Per and Malafry, + Laurence", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "53--69", + abstract = "Fiscal multipliers appear to vary greatly over time and space. + Based on VARs for a large number of countries, we document a + strong correlation between wealth inequality and the magnitude of + fiscal multipliers. In an attempt to account for this finding, we + develop a life-cycle, overlapping-generations economy with + uninsurable labor market risk. We calibrate our model to match + key characteristics of a number of OECD economies, including the + distribution of wages and wealth, social security, taxes, and + government debt and study how a fiscal multiplier depends on + various country characteristics. We find that the fiscal + multiplier is highly sensitive to the fraction of the population + who face binding credit constraints and also to the average + wealth level in the economy. These findings together help us + generate a cross-country pattern of multipliers that is quite + similar to that in the data.", + month = feb, + year = 2016, + language = "en" +} + +@INCOLLECTION{Quadrini2015-bp, + title = "Inequality in Macroeconomics", + author = "Quadrini, Vincenzo and Ríos-Rull, José-Víctor", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1229--1302", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Piketty2003-xn, + title = "Income inequality in the United States, 1913-1998", + author = "Piketty, T and Saez, E", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 118, + number = 1, + pages = "1--41", + month = feb, + year = 2003, + language = "en" +} + +@ARTICLE{McKay2016-rr, + title = "The role of automatic stabilizers in the {U}.s. business cycle", + author = "McKay, Alisdair and Reis, Ricardo", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 84, + number = 1, + pages = "141--194", + abstract = "Most countries have automatic rules in their tax-and-transfer + systems that are partly intended to stabilize economic + fluctuations. This paper measures how effective they are. We put + forward a model that merges the standard incomplete-markets model + of consumption and inequality with the new Keynesian model of + nominal rigidities and business cycles, and that includes most of + the main potential stabilizers in the U.S. data, as well as the + theoretical channels by which they may work. We find that the + conventional argument that stabilizing disposable income will + stabilize aggregate demand plays a negligible role on the + effectiveness of the stabilizers, whereas tax-and-transfer + programs that affect inequality and social insurance can have a + large effect on aggregate volatility. However, as currently + designed, the set of stabilizers in place in the United States + has barely had any effect on volatility. According to our model, + expanding safety-net programs, like food stamps, has the largest + potential to enhance the effectiveness of the stabilizers.", + year = 2016, + language = "en" +} + +@ARTICLE{Kopczuk2004-bb, + title = "Top wealth shares in the United States, {1916–2000}: Evidence + from estate tax returns", + author = "Kopczuk, Wojciech and Saez, Emmanuel", + journal = "Natl. Tax J.", + publisher = "University of Chicago Press", + volume = 57, + number = "2.2", + pages = "445--487", + month = jun, + year = 2004, + language = "en" +} + +@ARTICLE{Jorda2017-jd, + title = "The rate of return on everything, {1870–2015}", + author = "Jorda, Oscar and {Federal Reserve Bank of San Francisco} and + Knoll, Katharina and Kuvshinov, Dmitry and Schularick, Moritz and + Taylor, Alan M and {Deutsche Bundesbank} and {University of Bonn} + and {University of Bonn} and {University of Bonn}", + journal = "Federal Reserve Bank of San Francisco, Working Paper Series", + publisher = "Federal Reserve Bank of San Francisco", + pages = "01--123", + abstract = "What is the aggregate real rate of return in the economy? Is it + higher than the growth rate of the economy and, if so, by how + much? Is there a tendency for returns to fall in the long-run? + Which particular assets have the highest long-run returns? We + answer these questions on the basis of a new and comprehensive + dataset for all major asset classes, including housing. The + annual data on total returns for equity, housing, bonds, and + bills cover 16 advanced economies from 1870 to 2015, and our new + evidence reveals many new findings and puzzles.", + month = dec, + year = 2017 +} + +@INCOLLECTION{Hornstein2005-td, + title = "The effects of technical change on labor market inequalities", + author = "Hornstein, Andreas and Krusell, Per and Violante, Giovanni L", + booktitle = "Handbook of Economic Growth", + publisher = "Elsevier", + pages = "1275--1370", + year = 2005 +} + +@ARTICLE{Heathcote2005-ls, + title = "Fiscal policy with heterogeneous agents and incomplete markets", + author = "Heathcote, Jonathan", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 72, + number = 1, + pages = "161--188", + abstract = "I undertake a quantitative investigation into the short run + effects of changes in the timing of taxes for a model economy in + which heterogeneous households trade only one asset and face a + borrowing constraint. This asset market structure implies that + the consumption of low wealth households is sensitive to tax + changes. The main finding of the paper is that when the wealth + distribution in the model resembles that in the United States, + market incompleteness accounts for large immediate aggregate + consumption increases following tax cuts, and large consumption + falls following tax increases. When taxes are lump-sum, for + example, a dollar change in tax revenue is associated with a 15 + cent change in aggregate consumption, compared to a response of + roughly one third this size when markets are complete but + households are finitely-lived. I find the response to tax changes + to be larger if the interest rate is constant rather than + determined endogenously, and smaller if taxes are proportional + rather than lump-sum.", + month = jan, + year = 2005, + language = "en" +} + +@ARTICLE{Cronqvist2015-lq, + title = "The origins of savings behavior", + author = "Cronqvist, Henrik and Siegel, Stephan", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 123, + number = 1, + pages = "123--169", + abstract = "What are the origins of individual savings behavior? Using data + on identical and fraternal twins matched with data on their + savings behavior, we find that an individual's savings propensity + is governed by both genetic predispositions, social transmission + from parents to their children, and gene-environment interplay + where certain environments moderate genetic influences. Genetic + variation explains about 35 percent of the variation in savings + rates across individuals, and this genetic effect is stronger in + less constraining, high socioeconomic status environments. + Parent-child transmission influences savings for young + individuals and those who grew up in a family environment with + less competition for parental resources. Individual-specific life + experiences is a very important explanation for behavior in the + savings domain, and strongest in urban communities. In a world + progressing rapidly towards individual retirement savings + autonomy, understanding the origins of individuals' savings + behavior are of key importance to economists as well as policy + makers.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Campanale2007-fn, + title = "Increasing returns to savings and wealth inequality", + author = "Campanale, Claudio", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 10, + number = 4, + pages = "646--675", + abstract = "In this paper I present an explanation to the fact that in the + data wealth is substantially more concentrated than income. + Starting from the observation that the composition of households' + portfolios changes towards a larger share of high-yield assets as + the level of net worth increases, I first use data on historical + asset returns and portfolio composition by wealth level to + construct an empirical return function. I then augment an + Overlapping Generation version of the standard neoclassical + growth model with idiosyncratic labor income risk and missing + insurance markets to allow for returns on savings to be + increasing in the level of accumulated assets. The quantitative + properties of the model are examined and show that an empirically + plausible difference between the return faced by poor and wealthy + agents is able to generate a substantial increase in wealth + inequality compared to the basic model, enough to match the Gini + index and all but the top 1 percentile of the US distribution of + wealth.", + month = oct, + year = 2007, + language = "en" +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/self.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/self.bib new file mode 100644 index 00000000..cd38921b --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/self.bib @@ -0,0 +1,11 @@ +@ARTICLE{Hubmer2018-dt, + title = "Sources of {US} wealth inequality: Past, present, and future", + author = "Hubmer, Joachim and Krusell, Per and Smith, Jr., Anthony A.", + journal = "NBER Macroeconomics Annual", + volume = 35, + pages = "1--72", + year = 2021, + doi = "10.1086/712332", + note = "Working paper version: ``A comprehensive quantitative theory of the U.S. wealth distribution'', 2018", + language = "en" +} diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/subsequent-literature-analysis.md b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/subsequent-literature-analysis.md new file mode 100644 index 00000000..ab2b6f89 --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/subsequent-literature-analysis.md @@ -0,0 +1,15 @@ +# Subsequent Literature Analysis: [Paper Title] + +## Papers that cite my ballpark paper + +I found 14 papers in LitMaps. + +## What the subsequent literature tells us + +The subsequent literature shows that ideas of the model used in "HKS" paper are increasingly used for policy analysis, especially to study how monetary and fiscal policies affect different parts of the wealth distribution, rather than only matching inequality patterns. At the same time, new empirical and theoretical work strengthens these models by disciplining saving and return behavior with micro data and by providing deeper foundations for income risk and discount-factor heterogeneity. More recent studies also introduce new channels such as market power and beliefs, suggesting that future research needs to integrate multiple mechanisms to better explain changes in wealth inequality. + +## Most important subsequent papers + +1. Fagereng, Holm, Moll & Natvik (2019) “Saving Behavior Across the Wealth Distribution: The Importance of Capital Gains”: Puts empirical structure on saving and returns by wealth. Critical for validating and refining the mechanisms that generate the right tail in HKS. +2. Boar & Midrigan (2019) “Markups and Inequality”: Shifts the focus from individual saving and income to how market power and product market structure shape inequality, broadening the agenda to firm- and market-driven sources of wealth concentration. +3. Ma, Stachurski & Toda (2019) “The income fluctuation problem and the evolution of wealth” (JET): Provides theoretical link from the income fluctuation problem to the evolution and shape of the wealth distribution. Clarifies when and how HKS-style dynamics arise from first principles. \ No newline at end of file diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/subsequent-literature.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/subsequent-literature.bib new file mode 100644 index 00000000..cadb23fd --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/subsequent-literature.bib @@ -0,0 +1,129 @@ +% Exported from Litmaps (https://www.litmaps.com) + +@article{monetary_lenza_2024, + title = {How does monetary policy affect income and wealth inequality? Evidence from quantitative easing in the euro area}, + doi = {10.1002/jae.3053}, + author = {Lenza, M. and Slačálek, Jiří}, + journal = {Journal of applied econometrics}, + year = {2024}, + litmapsId = {271556094} +} + + +@article{saving_fagereng_2019, + title = {Saving Behavior Across the Wealth Distribution: The Importance of Capital Gains}, + doi = {10.3386/w26588}, + author = {Fagereng, Å. and Holm, Martin B. and Moll, Benjamin and Natvik, G.}, + year = {2019}, + litmapsId = {279248643} +} + + +@article{reforming_guner_2021, + title = {Reforming the Individual Income Tax in Spain}, + doi = {10.2139/ssrn.3783818}, + author = {Guner, Nezih and Lopez-Segovia, Javier and Ramos, Roberto}, + journal = {Social Science Research Network}, + year = {2021}, + litmapsId = {2143757} +} + + +@article{income_ma_2019, + title = {The income fluctuation problem and the evolution of wealth}, + doi = {10.1016/j.jet.2020.105003}, + author = {Ma, Qingyin and Stachurski, J. and Toda, Alexis Akira}, + journal = {Journal of Economics Theory}, + year = {2019}, + litmapsId = {279399271} +} + + +@article{markups_boar_2019, + title = {Markups and Inequality}, + doi = {10.3386/w25952}, + author = {Boar, Corina and Midrigin, Virgiliu}, + journal = {Social Science Research Network}, + year = {2019}, + litmapsId = {280089818} +} + + +@article{credit_nakajima_2014, + title = {CREDIT, BANKRUPTCY, AND AGGREGATE FLUCTUATIONS}, + doi = {10.21799/frbp.wp.2014.31}, + author = {Nakajima, Makoto and Ríos-Rull, José-Víctor}, + journal = {Social Science Research Network}, + year = {2014}, + litmapsId = {47206598} +} + + +@article{dynamic_stachurski_2019, + title = {Dynamic programming with state-dependent discounting}, + doi = {10.1016/j.jet.2021.105190}, + author = {Stachurski, J. and Zhang, Junnan}, + journal = {Journal of Economics Theory}, + year = {2019}, + litmapsId = {279521359} +} + + +@article{monetary_lenza_2020, + title = {How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from the Euro Area}, + author = {Lenza, M. and Slačálek, Jiří}, + year = {2020}, + litmapsId = {230426140} +} + + +@article{monetary_lenza_2020, + title = {How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area}, + author = {Lenza, M. and Slacalek, Jiri and Adam, Klaus and Bicakova, Alena and Brun, Lídia and Constâncio, Vítor and Dossche, Maarten and Ehrmann, Michael and Fuchs-Schündeln, Nicola and Galí, Jordi and Garbinti, Bertrand and Georgarakos, Dimitris and Giannone, Domenico and Jarociński, Marek and Mackowiak, Bartosz and Martin, Alberto and Masuch, K. and Monnin, Pierre and Primiceri, Giorgio and Roma, Moreno and Rosolia, A. and Samarina, A. and Tristani, O. and Tujula, Mika and Tzamourani, P. and Violante, Gianluca and Winkler, Bernhard and Wolf, Christian and Wright, Jonathan}, + year = {2020}, + litmapsId = {273944547} +} + + +@article{culture_fleck_2020, + title = {Culture and Portfolios: Trust, Precautionary Savings and Home Ownership}, + doi = {10.2139/ssrn.3676330}, + author = {Fleck, J. and Monninger, Adrian}, + journal = {Social Science Research Network}, + year = {2020}, + litmapsId = {8294873} +} + + +@article{monetary_lenza_2020, + title = {How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area}, + author = {Lenza, M. and Slacalek, Jiri and Adam, Klaus and Bicakova, Alena and Brun, Lídia and Constâncio, Vítor and Dossche, Maarten and Ehrmann, Michael and Fuchs-Schündeln, Nicola and Galí, J. and Garbinti, Bertrand and Georgarakos, Dimitris and Giannone, Domenico and Jarociński, Marek and Mackowiak, Bartosz and Martin, Alberto and Masuch, K. and Monnin, Pierre and Primiceri, Giorgio and Roma, Moreno and Rosolia, A. and Samarina, A. and Tristani, O. and Tujula, Mika and Tzamourani, P. and Violante, Gianluca and Winkler, Bernhard and Wolf, Christian and Wright, Jonathan}, + year = {2020}, + litmapsId = {276451541} +} + + +@article{monetary_lenza_2019, + title = {How Does Monetary Policy A ect Income and Wealth Inequality ? Evidence from Quantitative Easing in the Euro Area February 14 , 2019}, + author = {Lenza, M. and Slačálek, Jiří}, + year = {2019}, + litmapsId = {234364312} +} + + +@article{dynamic_ma_2019, + title = {Dynamic Optimal Choice When Rewards are Unbounded Below}, + author = {Ma, Qingyin and Stachurski, John}, + journal = {arXiv: Theoretical Economics}, + year = {2019}, + litmapsId = {205598189} +} + + +@article{n_ma_2019, + title = {N ov 2 01 9 Dynamic optimal choice when rewards are unbounded below 1}, + author = {Ma, Qingyin and Stachurski, J.}, + year = {2019}, + litmapsId = {242010840} +} + diff --git a/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/wealth_inequality.bib b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/wealth_inequality.bib new file mode 100644 index 00000000..161ed996 --- /dev/null +++ b/models/We-Would-Like-In-Econ-ARK/HKSWealthDistribution/wealth_inequality.bib @@ -0,0 +1,1334 @@ +@ARTICLE{GabaixUnknown-mc, + title = "The Dynamics of Inequality", + author = "Gabaix, Xavier and Lasry, Jean-Michel and Lions, Pierre-Louis and + Moll, Benjamin", + abstract = "The past forty years have seen a rapid rise in top income + inequality in the United States. While there is a large number of + existing theories of the Pareto tail of the long-run income + distributions, almost none of these address the fast rise in top + inequality observed in the data. We show that standard theories, + which build on a random growth mechanism, generate transition + dynamics that are an order of magnitude too slow relative to those + observed in the data. We then suggest two parsimonious deviations + from the canonical model that can explain such changes: ``scale + dependence'' that may arise from changes in skill prices, and + ``type dependence,'' i.e. the presence of some ``high-growth + types.'' These deviations are consistent with theories in which + the increase in top income inequality is driven by the rise of + ``superstar'' entrepreneurs or managers." +} + + +@ARTICLE{Unknown2016-bh, + title = "Office Tax Analysis: Taxes Paid Capital Gains Returns Positive Net + Capital Gains", + pages = "1954--2014", + year = 2016 +} + +@ARTICLE{Toda2019-kd, + title = "Wealth distribution with random discount factors", + author = "Toda, Alexis Akira", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 104, + pages = "101--113", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{Toda2014-py, + title = "Incomplete market dynamics and cross-sectional distributions", + author = "Toda, Alexis Akira", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 154, + pages = "310--348", + abstract = "The size distributions of many economic variables seem to obey + the double power law, that is, the power law holds in both the + upper and the lower tails. I explain this emergence of the double + power law—which has important economic, econometric, and social + implications—using a tractable dynamic stochastic general + equilibrium model with heterogeneous agents subject to aggregate + and idiosyncratic investment risks. I establish theoretical + properties such as existence, uniqueness, and constrained + efficiency of equilibrium, and provide a numerical algorithm that + is guaranteed to converge. The model is widely applicable: it + allows for arbitrary homothetic CRRA recursive preferences, an + arbitrary Markov process governing aggregate shocks, and an + arbitrary number of technologies and assets with arbitrary + portfolio constraints.", + month = nov, + year = 2014, + language = "en" +} + +@ARTICLE{Stiglitz1969-hx, + title = "Distribution of income and wealth among individuals", + author = "Stiglitz, J E", + journal = "Econometrica", + publisher = "JSTOR", + volume = 37, + number = 3, + pages = 382, + month = aug, + year = 1969 +} + +@ARTICLE{Stachurski2018-pa, + title = "An impossibility theorem for wealth in heterogeneous-agent + models with limited heterogeneity", + author = "Stachurski, John and Toda, Alexis Akira", + journal = "arXiv [econ.GN]", + abstract = "It has been conjectured that canonical + Bewley--Huggett--Aiyagari heterogeneous-agent models cannot + explain the joint distribution of income and wealth. The + results stated below verify this conjecture and clarify its + implications under very general conditions. We show in + particular that if (i) agents are infinitely-lived, (ii) + saving is risk-free, and (iii) agents have constant discount + factors, then the wealth distribution inherits the tail + behavior of income shocks (e.g., light-tailedness or the + Pareto exponent). Our restrictions on utility require only + that relative risk aversion is bounded, and a large variety + of income processes are admitted. Our results show + conclusively that it is necessary to go beyond standard + models to explain the empirical fact that wealth is + heavier-tailed than income. We demonstrate through examples + that relaxing any of the above three conditions can generate + Pareto tails.", + month = jul, + year = 2018, + archivePrefix = "arXiv", + primaryClass = "econ.GN" +} + +@ARTICLE{Saez2016-zm, + title = "Wealth inequality in the United States since 1913: Evidence from + capitalized income tax data", + author = "Saez, Emmanuel and Zucman, Gabriel", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 131, + number = 2, + pages = "519--578", + abstract = "AbstractThis paper combines income tax returns with macroeconomic + household balance sheets to estimate the distribution of wealth + in the United States since 1913. We estimate wealth by + capitalizing the incomes reported by individual taxpayers, + accounting for assets that do not generate taxable income. We + successfully test our capitalization method in three micro + datasets where we can observe both income and wealth: the Survey + of Consumer Finance, linked estate and income tax returns, and + foundations’ tax records. We find that wealth concentration was + high in the beginning of the twentieth century, fell from 1929 to + 1978, and has continuously increased since then. The top 0.1\% + wealth share has risen from 7\% in 1978 to 22\% in 2012, a level + almost as high as in 1929. Top wealth-holders are younger today + than in the 1960s and earn a higher fraction of the economy’s + labor income. The bottom 90\% wealth share first increased up to + the mid-1980s and then steadily declined. The increase in wealth + inequality in recent decades is due to the upsurge of top incomes + combined with an increase in saving rate inequality. We explain + how our findings can be reconciled with Survey of Consumer + Finances and estate tax data.", + month = may, + year = 2016, + language = "en" +} + +@INCOLLECTION{Quadrini2015-bp, + title = "Inequality in Macroeconomics", + author = "Quadrini, Vincenzo and Ríos-Rull, José-Víctor", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1229--1302", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Quadrini2000-yd, + title = "Entrepreneurship, saving, and social mobility", + author = "Quadrini, Vincenzo", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 3, + number = 1, + pages = "1--40", + month = jan, + year = 2000, + language = "en" +} + +@INCOLLECTION{Piketty2015-mp, + title = "Wealth and inheritance in the Long Run", + author = "Piketty, Thomas and Zucman, Gabriel", + booktitle = "Handbook of Income Distribution", + publisher = "Elsevier", + pages = "1303--1368", + series = "Handbook of Income Distribution", + year = 2015 +} + +@ARTICLE{Piketty2007-fo, + title = "How progressive is the {U}.s. federal tax system? A historical + and international perspective", + author = "Piketty, Thomas and Saez, Emmanuel", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 21, + number = 1, + pages = "3--24", + abstract = "This paper provides estimates of federal tax rates by income + groups in the United States since 1960, with special emphasis on + very top income groups. We include individual and corporate + income taxes, payroll taxes, and estate and gift taxes. The + progressivity of the U.S. federal tax system at the top of the + income distribution has declined dramatically since the 1960s. + This dramatic drop in progressivity is due primarily to a drop in + corporate taxes and in estate and gift taxes combined with a + sharp change in the composition of top incomes away from capital + income and toward labor income. The sharp drop in statutory top + marginal individual income tax rates has contributed only + moderately to the decline in tax progressivity. International + comparisons confirm that is it critical to take into account + other taxes than the individual income tax to properly assess the + extent of overall tax progressivity, both for time trends and for + cross-country comparisons. The pattern for the United Kingdom is + similar to the U.S. pattern. France had less progressive taxes + than the United States or the United Kingdom in 1970 but has + experienced an increase in tax progressivity and has now a more + progressive tax system than the United States or the United + Kingdom.", + month = jan, + year = 2007, + language = "en" +} + +@ARTICLE{Piketty2003-xn, + title = "Income inequality in the United States, 1913-1998", + author = "Piketty, T and Saez, E", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 118, + number = 1, + pages = "1--41", + month = feb, + year = 2003, + language = "en" +} + +@ARTICLE{Gagnon2014-ko, + title = "Piketty, {T}. (2014), capital in the twenty-first century + (translated by Arthur Goldhammer), the Belknap press of Harvard + university press, Cambridge, mass. 685 p", + author = "Gagnon, Jean-Marie", + journal = "Actual. Econ.", + publisher = "Consortium Erudit", + volume = 90, + number = 4, + pages = 329, + year = 2014 +} + +@ARTICLE{Piketty2003-zj, + title = "Income Inequality in France, {1901–1998}", + author = "Piketty, Thomas", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 5, + pages = "1004--1042", + abstract = "The objective of this research is to document and to explain + trends in inequality in 20th century France. Data from income tax + returns (1915-98), wage tax returns (1919-98) and inheritance tax + returns (1902-94), is used in order to compute fully homogeneous, + yearly estimates of income inequality, wage inequality and wealth + inequality. The main conclusion is that the decline in income + inequality that took place during the first half of the 20th + century was mostly accidental. In France and possibly in a number + of other developed countries as well wage inequality has actually + been extremely stable in the long run, and the secular decline in + income inequality is for the most part a capital income + phenomenon. Holders of very large fortunes were severely hit by + major shocks during the 1914-45 period, and were never able to + fully recover from these shocks, probably because of the dynamic + effects of progressive taxation on capital accumulation and + pre-tax income inequality.", + month = oct, + year = 2003 +} + +@ARTICLE{Piketty1997-dn, + title = "The dynamics of the wealth distribution and the interest rate + with credit rationing", + author = "Piketty, Thomas", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 64, + number = 2, + pages = 173, + abstract = "With decreasing returns and first-best credit, the long-run + interest rate and aggregate output are uniquely determined, and + wealth dispersion among individuals or firms is irrelevant. + Introducing credit rationing into the Solow model modifies these + conclusions. Multiple stationary interest rates and wealth + distributions can exist because higher initial rates can be + self-reinforcing through higher credit rationing and lower + capital accumulation. The wealth accumulation process is ergodic + in every steady state, but wealth mobility is lower with higher + steady-state interest rates. Aggregate output is higher in steady + states with lower interest rates because credit is better + allocated. Short-run interest rate or distribution shocks can be + self-sustaining and can have long-run effects on output through + the induced dynamics of the wealth distribution and credit + rationing.", + month = apr, + year = 1997 +} + +@ARTICLE{Piketty1995-ml, + title = "Social Mobility and Redistributive Politics", + author = "Piketty, T", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 110, + number = 3, + pages = "551--584", + abstract = "Just like economists, voters have conflicting views about + redistributive taxation because they estimate its incentive costs + differently. We model rational agents as trying to learn from + their dynastic income mobility experience the relative importance + of effort and predetermined factors in the generation of income + inequality and therefore the magnitude of these incentive costs. + In the long run, ``left-wing dynasties'' believing less in + individual effort and voting for more redistribution coexist with + ``right-wing dynasties.'' This allows us to explain why + individual mobility experience and not only current income + matters for political attiitudes and how persistent differences + in perceptions about social mobility can generate persistent + differences in redistribution across countries.", + month = aug, + year = 1995 +} + +@INCOLLECTION{Piazzesi2016-no, + title = "Housing and macroeconomics", + author = "Piazzesi, M and Schneider, M", + booktitle = "Handbook of Macroeconomics", + publisher = "Elsevier", + pages = "1547--1640", + series = "Handbook of Macroeconomics", + year = 2016, + language = "en" +} + +@ARTICLE{Nirei2016-ya, + title = "Pareto distribution of income in neoclassical growth models", + author = "Nirei, Makoto and Aoki, Shuhei", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 20, + pages = "25--42", + abstract = "We construct a neoclassical growth model with heterogeneous + households that accounts for the Pareto distributions of income + and wealth in the upper tail. In an otherwise standard Bewley + model, we feature households' business productivity risks and + borrowing constraints, which we find generate the Pareto + distributions. Households with low productivity rely on wages and + returns from safe assets, while high productivity households + choose not to diversify their business risks. The model can + quantitatively account for the observed income distribution in + the U.S. under reasonable calibrations. Furthermore, we conduct + several comparative statics to examine how changes in parameters + affect the Pareto distributions. In particular, we find that the + change in the top tax rates in the 1980s potentially accounts for + much of the observed increase in top income dispersion in the + last decades. Our analytical result provides a coherent + interpretation for the numerical comparative statics.", + month = apr, + year = 2016, + language = "en" +} + +@ARTICLE{Mehra1985-rw, + title = "The equity premium: A puzzle", + author = "Mehra, Rajnish and Prescott, Edward C", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 15, + number = 2, + pages = "145--161", + abstract = "Restrictions that a class of general equilibrium models place + upon the average returns of equity and Treasury bills are found + to be strongly violated by the U.S. data in the 1889–1978 period. + This result is robust to model specification and measurement + problems. We conclude that, most likely, an equilibrium model + which is not an Arrow-Debreu economy will be the one that + simultaneously rationalizes both historically observed large + average equity return and the small average risk-free return.", + month = mar, + year = 1985, + language = "en" +} + +@ARTICLE{McKay2016-rr, + title = "The role of automatic stabilizers in the {U}.s. business cycle", + author = "McKay, Alisdair and Reis, Ricardo", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 84, + number = 1, + pages = "141--194", + year = 2016, + language = "en" +} + +@ARTICLE{McKay2016-qy, + title = "The power of forward guidance revisited", + author = "McKay, Alisdair and Nakamura, Emi and Steinsson, Jón", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 106, + number = 10, + pages = "3133--3158", + abstract = "In recent years, central banks have increasingly turned to + forward guidance as a central tool of monetary policy. Standard + monetary models imply that far future forward guidance has huge + effects on current outcomes, and these effects grow with the + horizon of the forward guidance. We present a model in which the + power of forward guidance is highly sensitive to the assumption + of complete markets. When agents face uninsurable income risk and + borrowing constraints, a precautionary savings effect tempers + their responses to changes in future interest rates. As a + consequence, forward guidance has substantially less power to + stimulate the economy. (JEL E21, E40, E50)", + month = oct, + year = 2016, + language = "en" +} + +@ARTICLE{Krusell2015-ml, + title = "Piketty's Second Law Capitalism Fundamental?", + author = "Krusell, P", + journal = "Journal Political Economy", + volume = 123, + number = 4, + pages = "725--748", + year = 2015 +} + +@INCOLLECTION{Krusell2013-tv, + title = "Quantitative macroeconomic models with heterogeneous agents", + author = "Krusell, Per and Smith, Jr, Anthony A", + editor = "Blundell, Richard and Newey, Whitney K and Persson, Torsten", + booktitle = "Advances in Economics and Econometrics", + publisher = "Cambridge University Press", + address = "Cambridge", + pages = "298--340", + year = 2013 +} + +@ARTICLE{Krusell1998-cr, + title = "Income and wealth heterogeneity in the macroeconomy", + author = "Krusell, Per and Smith, Jr, Anthony A", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 106, + number = 5, + pages = "867--896", + abstract = "How do movements in the distribution of income and wealth affect + the macroeconomy? We analyze this question theoretically, using + numerical methods, in the context of a calibrated version of the + stochastic growth model with partially uninsurable idiosyncratic + risk and movements in aggregate productivity.", + month = oct, + year = 1998 +} + +@ARTICLE{Krusell2009-jt, + title = "Revisiting the welfare effects of eliminating business cycles", + author = "Krusell, Per and Mukoyama, Toshihiko and Şahin, Ayşegül and + Smith, Jr, Anthony A", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 12, + number = 3, + pages = "393--404", + abstract = "We investigate the welfare effects of eliminating business cycles + in a model with substantial consumer heterogeneity. The + heterogeneity arises from uninsurable and idiosyncratic + uncertainty in preferences and employment status. We calibrate + the model to match the distribution of wealth in U.S. data and + features of transitions between employment and unemployment. In + comparison with much of the literature, we find rather large + effects. For our benchmark model, we find welfare effects that, + on average across all consumers, are of a bit more than one order + of magnitude larger than those computed by Lucas [Lucas Jr., + R.E., 1987. Models of Business Cycles. Basil Blackwell, New + York]. When we distinguish long- from short-term unemployment, + long-term unemployment being distinguished by poor (and highly + procyclical) employment prospects and low unemployment + compensation, the average gain from eliminating cycles is as much + as 1\% in consumption equivalents. In addition, in both models, + there are large differences across groups: very poor consumers + gain a lot when cycles are removed (the long-term unemployed as + much as around 30\%), as do very rich consumers, whereas the + majority of consumers—the “middle class”—sees much smaller gains + from removing cycles. Inequality also rises substantially upon + removing cycles.", + month = jul, + year = 2009, + language = "en" +} + +@ARTICLE{Kopczuk2004-bb, + title = "Top wealth shares in the United States, {1916–2000}: Evidence + from estate tax returns", + author = "Kopczuk, Wojciech and Saez, Emmanuel", + journal = "Natl. Tax J.", + publisher = "University of Chicago Press", + volume = 57, + number = "2.2", + pages = "445--487", + month = jun, + year = 2004, + language = "en" +} + +@ARTICLE{Kopczuk2015-zp, + title = "What do we know about the evolution of top wealth shares in the + United States?", + author = "Kopczuk, Wojciech", + journal = "J. Econ. Perspect.", + publisher = "American Economic Association", + volume = 29, + number = 1, + pages = "47--66", + abstract = "I discuss available evidence about the evolution of top wealth + shares in the United States over the course of the 20th century. + The three main approaches—the Survey of Consumer Finances, estate + tax multiplier, and capitalization methods—generate generally + consistent findings until mid-1980s but diverge since then, with + the capitalization method showing a dramatic increase in wealth + concentration and the other two methods showing at best a small + increase. I discuss strengths and weaknesses of different + approaches. The increase in capitalization estimates since 2000 + is driven by a dramatic and puzzling increase in fixed income + assets. There is evidence that estate tax estimates may not be + sufficiently accounting for mortality improvements over time. The + nonresponse and coverage issues in the SCF are a concern. I + conclude that the changing nature of top incomes and the + increased importance of self-made wealth may explain difficulties + in implementing each of the methods and why the results diverge.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Kesten1973-qv, + title = "Random difference equations and Renewal theory for products of + random matrices", + author = "Kesten, Harry", + journal = "Acta Math.", + publisher = "International Press of Boston", + volume = 131, + number = 0, + pages = "207--248", + year = 1973, + language = "en" +} + +@ARTICLE{Kennickell2017-fa, + title = "Tossed and turned: Wealth dynamics of {U}.{S}. households + 2007-2009", + author = "Kennickell, Arthur B", + journal = "Stat. J. IAOS", + publisher = "SAGE Publications", + volume = 33, + number = 1, + pages = "175--183", + month = mar, + year = 2017 +} + +@ARTICLE{Kaymak2016-wg, + title = "The evolution of wealth inequality over half a century: The role + of taxes, transfers and technology", + author = "Kaymak, Barış and Poschke, Markus", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "1--25", + abstract = "Over the last 50 years the U.S. tax system went through a + striking transformation that reduced the effective tax rates for + top income groups and raised transfers to seniors. This paper + investigates the macroeconomic repercussions of this change in + policy, particularly for the distributions of income, wealth and + consumption. Changes in taxes and transfers account for nearly + half of the rise in wealth concentration. Nonetheless, their + impact on the distributions of income and consumption has been + minor due to changes in equilibrium prices and the offsetting + effects of tax cuts and transfers on the dispersion of + consumption. Results highlight the role of increasing wage + dispersion during this period as the main driver of trends in + inequality.", + month = feb, + year = 2016, + language = "en" +} + +@ARTICLE{Katz1992-yc, + title = "Changes in relative wages, 1963-1987: Supply and demand factors", + author = "Katz, L F and Murphy, K M", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 107, + number = 1, + pages = "35--78", + month = feb, + year = 1992 +} + +@ARTICLE{Kartashova2014-ca, + title = "Private equity premium puzzle revisited", + author = "Kartashova, Katya", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 104, + number = 10, + pages = "3297--3334", + abstract = "This paper revisits the results of Moskowitz and + Vissing-Jørgensen (2002) on returns to entrepreneurial + investments in the United States. Following the authors' + methodology and new data from the Survey of Consumer Finances, I + find that the “private equity premium puzzle” does not survive + the period of high public equity returns in the 1990s. The + difference between private and public equity returns is positive + and large period-by-period between 1999 and 2007. Whereas in the + 2008–2010 period, overlapping with the Great Recession, public + and private equities performances are substantially closer. I + validate these results in the aggregate data going back to the + 1960s. (JEL G11, G12, L26)", + month = oct, + year = 2014, + language = "en" +} + +@ARTICLE{Karabarbounis2014-el, + title = "The global decline of the labor share", + author = "Karabarbounis, Loukas and Neiman, Brent", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 129, + number = 1, + pages = "61--103", + abstract = "AbstractThe stability of the labor share of income is a key + foundation in macroeconomic models. We document, however, that + the global labor share has significantly declined since the early + 1980s, with the decline occurring within the large majority of + countries and industries. We show that the decrease in the + relative price of investment goods, often attributed to advances + in information technology and the computer age, induced firms to + shift away from labor and toward capital. The lower price of + investment goods explains roughly half of the observed decline in + the labor share, even when we allow for other mechanisms + influencing factor shares, such as increasing profits, + capital-augmenting technology growth, and the changing skill + composition of the labor force. We highlight the implications of + this explanation for welfare and macroeconomic dynamics.", + month = feb, + year = 2014, + language = "en" +} + +@BOOK{Karabarbounis2014-xe, + title = "Capital Depreciation Labor Shares Around World: Measurement + Implications", + author = "Karabarbounis, L and Neiman, B", + year = 2014 +} + +@ARTICLE{Kaplan2018-sr, + title = "Monetary policy according to {HANK}", + author = "Kaplan, Greg and Moll, Benjamin and Violante, Giovanni L", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 108, + number = 3, + pages = "697--743", + abstract = "We revisit the transmission mechanism from monetary policy to + household consumption in a Heterogeneous Agent New Keynesian + (HANK) model. The model yields empirically realistic + distributions of wealth and marginal propensities to consume + because of two features: uninsurable income shocks and multiple + assets with different degrees of liquidity and different returns. + In this environment, the indirect effects of an unexpected cut in + interest rates, which operate through a general equilibrium + increase in labor demand, far outweigh direct effects such as + intertemporal substitution. This finding is in stark contrast to + small- and medium-scale Representative Agent New Keynesian (RANK) + economies, where the substitution channel drives virtually all of + the transmission from interest rates to consumption. Failure of + Ricardian equivalence implies that, in HANK models, the fiscal + reaction to the monetary expansion is a key determinant of the + overall size of the macroeconomic response. (JEL D31, E12, E21, + E24, E43, E52, E62)", + month = mar, + year = 2018, + language = "en" +} + +@ARTICLE{Jorda2017-jd, + title = "The rate of return on everything, {1870–2015}", + author = "Jorda, Oscar and {Federal Reserve Bank of San Francisco} and + Knoll, Katharina and Kuvshinov, Dmitry and Schularick, Moritz and + Taylor, Alan M and {Deutsche Bundesbank} and {University of Bonn} + and {University of Bonn} and {University of Bonn}", + journal = "Federal Reserve Bank of San Francisco, Working Paper Series", + publisher = "Federal Reserve Bank of San Francisco", + pages = "01--123", + abstract = "What is the aggregate real rate of return in the economy? Is it + higher than the growth rate of the economy and, if so, by how + much? Is there a tendency for returns to fall in the long-run? + Which particular assets have the highest long-run returns? We + answer these questions on the basis of a new and comprehensive + dataset for all major asset classes, including housing. The + annual data on total returns for equity, housing, bonds, and + bills cover 16 advanced economies from 1870 to 2015, and our new + evidence reveals many new findings and puzzles.", + month = dec, + year = 2017 +} + +@ARTICLE{Huggett1993-af, + title = "The risk-free rate in heterogeneous-agent incomplete-insurance + economies", + author = "Huggett, Mark", + journal = "J. Econ. Dyn. Control", + publisher = "Elsevier BV", + volume = 17, + number = "5-6", + pages = "953--969", + abstract = "Why has the average real risk-free interest rate been less than + one percent? The question is motivated by the failure of a class + of calibrated representative-agent economies to explain the + average return to equity and risk-free debt. I construct an + economy where agents experience uninsurable idiosyncratic + endowment shocks and smooth consumption by holding a risk-free + asset. I calibrate the economy and characterize equilibria + computationally. With a borrowing constraint of one year's + income, the resulting risk-free rate is more than one percent + below the rate in the comparable representative-agent economy.", + month = sep, + year = 1993, + language = "en" +} + +@INCOLLECTION{Hornstein2005-td, + title = "The effects of technical change on labor market inequalities", + author = "Hornstein, Andreas and Krusell, Per and Violante, Giovanni L", + booktitle = "Handbook of Economic Growth", + publisher = "Elsevier", + pages = "1275--1370", + year = 2005 +} + +@ARTICLE{Heathcote2010-bj, + title = "The macroeconomic implications of rising wage inequality in the + United States", + author = "Heathcote, Jonathan and Storesletten, Kjetil and Violante, + Giovanni L", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 118, + number = 4, + pages = "681--722", + abstract = "In recent decades, American workers have faced a rising college + premium, a narrowing gender gap, and increasing wage volatility. + This paper explores the quantitative and welfare implications of + these changes. The framework is an incomplete-markets life cycle + model in which individuals choose education, intrafamily time + allocation, and savings. Given the observed history of the U.S. + wage structure, the model replicates key trends in + cross-sectional inequality in hours worked, earnings, and + consumption. Recent cohorts enjoy welfare gains, on average, as + higher relative wages for college graduates and for women + translate into higher educational attainment and a more even + division of labor within the household.", + month = aug, + year = 2010, + language = "en" +} + +@ARTICLE{Heathcote2005-ls, + title = "Fiscal policy with heterogeneous agents and incomplete markets", + author = "Heathcote, Jonathan", + journal = "Rev. Econ. Stud.", + publisher = "Oxford University Press (OUP)", + volume = 72, + number = 1, + pages = "161--188", + abstract = "I undertake a quantitative investigation into the short run + effects of changes in the timing of taxes for a model economy in + which heterogeneous households trade only one asset and face a + borrowing constraint. This asset market structure implies that + the consumption of low wealth households is sensitive to tax + changes. The main finding of the paper is that when the wealth + distribution in the model resembles that in the United States, + market incompleteness accounts for large immediate aggregate + consumption increases following tax cuts, and large consumption + falls following tax increases. When taxes are lump-sum, for + example, a dollar change in tax revenue is associated with a 15 + cent change in aggregate consumption, compared to a response of + roughly one third this size when markets are complete but + households are finitely-lived. I find the response to tax changes + to be larger if the interest rate is constant rather than + determined endogenously, and smaller if taxes are proportional + rather than lump-sum.", + month = jan, + year = 2005, + language = "en" +} + +@BOOK{Guerrieri2011-cv, + title = "Credit Crises, Precautionary Savings, Liquidity Trap. {NBER} Working + Paper 17583", + author = "Guerrieri, V and Lorenzoni, G", + year = 2011 +} + +@ARTICLE{Gabaix2009-kn, + title = "Power laws in economics and finance", + author = "Gabaix, Xavier", + journal = "Annu. Rev. Econom.", + publisher = "Annual Reviews", + volume = 1, + number = 1, + pages = "255--294", + abstract = "A power law (PL) is the form taken by a large number of + surprising empirical regularities in economics and finance. This + review surveys well-documented empirical PLs regarding income and + wealth, the size of cities and firms, stock market returns, + trading volume, international trade, and executive pay. It + reviews detail-independent theoretical motivations that make + sharp predictions concerning the existence and coefficients of + PLs, without requiring delicate tuning of model parameters. These + theoretical mechanisms include random growth, optimization, and + the economics of superstars, coupled with extreme value theory. + Some empirical regularities currently lack an appropriate + explanation. This article highlights these open areas for future + research.", + month = sep, + year = 2009, + language = "en" +} + +@ARTICLE{Fagereng2020-vt, + title = "Heterogeneity and persistence in returns to wealth", + author = "Fagereng, Andreas and Guiso, Luigi and Malacrino, Davide and + Pistaferri, Luigi", + journal = "Econometrica", + publisher = "The Econometric Society", + volume = 88, + number = 1, + pages = "115--170", + abstract = "We provide a systematic analysis of the properties of individual + returns to wealth using 12 years of population data from Norway's + administrative tax records. We document a number of novel + results. First, individuals earn markedly different average + returns on their net worth (a standard deviation of 22.1\%) and + on its components. Second, heterogeneity in returns does not + arise merely from differences in the allocation of wealth between + safe and risky assets: returns are heterogeneous even within + narrow asset classes. Third, returns are positively correlated + with wealth: moving from the 10th to the 90th percentile of the + net worth distribution increases the return by 18 percentage + points (and 10 percentage points if looking at net‐of‐tax + returns). Fourth, individual wealth returns exhibit substantial + persistence over time. We argue that while this persistence + partly arises from stable differences in risk exposure and assets + scale, it also reflects heterogeneity in sophistication and + financial information, as well as entrepreneurial talent. + Finally, wealth returns are correlated across generations. We + discuss the implications of these findings for several strands of + the wealth inequality debate.", + year = 2020, + language = "en" +} + +@ARTICLE{Cronqvist2015-lq, + title = "The origins of savings behavior", + author = "Cronqvist, Henrik and Siegel, Stephan", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 123, + number = 1, + pages = "123--169", + abstract = "What are the origins of individual savings behavior? Using data + on identical and fraternal twins matched with data on their + savings behavior, we find that an individual's savings propensity + is governed by both genetic predispositions, social transmission + from parents to their children, and gene-environment interplay + where certain environments moderate genetic influences. Genetic + variation explains about 35 percent of the variation in savings + rates across individuals, and this genetic effect is stronger in + less constraining, high socioeconomic status environments. + Parent-child transmission influences savings for young + individuals and those who grew up in a family environment with + less competition for parental resources. Individual-specific life + experiences is a very important explanation for behavior in the + savings domain, and strongest in urban communities. In a world + progressing rapidly towards individual retirement savings + autonomy, understanding the origins of individuals' savings + behavior are of key importance to economists as well as policy + makers.", + month = feb, + year = 2015, + language = "en" +} + +@ARTICLE{Chatterjee1994-ch, + title = "Transitional dynamics and the distribution of wealth in a + neoclassical growth model", + author = "Chatterjee, Satyajit", + journal = "J. Public Econ.", + publisher = "Elsevier BV", + volume = 54, + number = 1, + pages = "97--119", + abstract = "The evolution of the personal distribution of wealth in a + standard neoclassical growth model is studied. If the economy is + growing toward the steady state and preferences are such that + marginal utility from consumption is infinite (finite) at some + (all) positive (non-negative) consumption level(s), then the + average saving propensity of agents is positively (negatively) + related to their wealth. If the economy is decaying toward the + steady state, these relationships are reversed. If wealth and + average saving propensity are positively (negatively) related, + the distribution of current period wealth Lorenz-dominates (is + Lorenz-dominated by) next period's distribution of wealth.", + month = may, + year = 1994, + language = "en" +} + +@ARTICLE{Castaneda2003-ow, + title = "Accounting for the {U}.s. earnings and wealth inequality", + author = "Castañeda, Ana and Díaz‐Giménez, Javier and Ríos‐Rull, + José‐víctor", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 111, + number = 4, + pages = "818--857", + abstract = "We show that a theory of earnings and wealth inequality, based on + the optimal choices of ex ante identical households that face + uninsured idiosyncratic shocks to their endowments of efficiency + labor units, accounts for the U.S. earnings and wealth inequality + almost exactly.", + month = aug, + year = 2003, + language = "en" +} + +@ARTICLE{Carroll1996-bk, + title = "On the concavity of the consumption function", + author = "Carroll, Christopher D and Kimball, Miles S", + journal = "Econometrica", + publisher = "JSTOR", + volume = 64, + number = 4, + pages = 981, + month = jul, + year = 1996 +} + +@BOOK{Carroll2012-uy, + title = "Theoretical Foundations Buffer Stock Saving", + author = "Carroll, C D", + year = 2012 +} + +@ARTICLE{Carroll2006-om, + title = "The method of endogenous gridpoints for solving dynamic + stochastic optimization problems", + author = "Carroll, Christopher D", + journal = "Econ. Lett.", + publisher = "Elsevier BV", + volume = 91, + number = 3, + pages = "312--320", + abstract = "This paper introduces a solution method for numerical dynamic + stochastic optimization problems that avoids rootfinding + operations. The idea is applicable to many microeconomic and + macroeconomic problems, including life cycle, buffer-stock, and + stochastic growth problems. Software is provided.", + month = jun, + year = 2006, + language = "en" +} + +@ARTICLE{Campbell2001-ir, + title = "Have individual stocks become more volatile? An empirical + exploration of idiosyncratic risk", + author = "Campbell, John Y and Lettau, Martin and Malkiel, Burton G and Xu, + Yexiao", + journal = "J. Finance", + publisher = "Wiley", + volume = 56, + number = 1, + pages = "1--43", + abstract = "ABSTRACTThis paper uses a disaggregated approach to study the + volatility of common stocks at the market, industry, and firm + levels. Over the period from 1962 to 1997 there has been a + noticeable increase in firm‐level volatility relative to market + volatility. Accordingly, correlations among individual stocks and + the explanatory power of the market model for a typical stock + have declined, whereas the number of stocks needed to achieve a + given level of diversification has increased. All the volatility + measures move together countercyclically and help to predict GDP + growth. Market volatility tends to lead the other volatility + series. Factors that may be responsible for these findings are + suggested.", + month = feb, + year = 2001, + language = "en" +} + +@ARTICLE{Campanale2007-fn, + title = "Increasing returns to savings and wealth inequality", + author = "Campanale, Claudio", + journal = "Rev. Econ. Dyn.", + publisher = "Elsevier BV", + volume = 10, + number = 4, + pages = "646--675", + abstract = "In this paper I present an explanation to the fact that in the + data wealth is substantially more concentrated than income. + Starting from the observation that the composition of households' + portfolios changes towards a larger share of high-yield assets as + the level of net worth increases, I first use data on historical + asset returns and portfolio composition by wealth level to + construct an empirical return function. I then augment an + Overlapping Generation version of the standard neoclassical + growth model with idiosyncratic labor income risk and missing + insurance markets to allow for returns on savings to be + increasing in the level of accumulated assets. The quantitative + properties of the model are examined and show that an empirically + plausible difference between the return faced by poor and wealthy + agents is able to generate a substantial increase in wealth + inequality compared to the basic model, enough to match the Gini + index and all but the top 1 percentile of the US distribution of + wealth.", + month = oct, + year = 2007, + language = "en" +} + +@ARTICLE{Cagetti2009-wg, + title = "Estate taxation, entrepreneurship, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 99, + number = 1, + pages = "85--111", + abstract = "This paper studies the estate tax in a quantitative framework + with business investment, borrowing constraints, estate + transmission, and wealth inequality. We find that the estate tax + has little effect on the saving and investment decisions of small + businesses, but does distort the decisions of larger firms, + thereby reducing aggregate output and savings. Removing such + distortions by eliminating the estate tax does not necessarily + imply that everyone would be better off. If other taxes were + raised to reestablish fiscal balance, those at the top of the + wealth distribution would experience a large welfare gain, but + most of the population would lose. (JEL D31, E21, H2)", + month = feb, + year = 2009, + language = "en" +} + +@ARTICLE{Cagetti2006-sz, + title = "Entrepreneurship, frictions, and wealth", + author = "Cagetti, Marco and De Nardi, Mariacristina", + journal = "J. Polit. Econ.", + publisher = "University of Chicago Press", + volume = 114, + number = 5, + pages = "835--870", + abstract = "This paper constructs and calibrates a parsimonious model of + occupational choice that allows for entrepreneurial entry, exit, + and investment decisions in the presence of borrowing + constraints. The model fits very well a number of empirical + observations, including the observed wealth distribution for + entrepreneurs and workers. At the aggregate level, more + restrictive borrowing constraints generate less wealth + concentration and reduce average firm size, aggregate capital, + and the fraction of entrepreneurs. Voluntary bequests allow some + high-ability workers to establish or enlarge an entrepreneurial + activity. With accidental bequests only, there would be fewer + very large firms and less aggregate capital and wealth + concentration.", + month = oct, + year = 2006, + language = "en" +} + +@ARTICLE{Brinca2016-fs, + title = "Fiscal multipliers in the {21st} century", + author = "Brinca, Pedro and Holter, Hans A and Krusell, Per and Malafry, + Laurence", + journal = "J. Monet. Econ.", + publisher = "Elsevier BV", + volume = 77, + pages = "53--69", + abstract = "Fiscal multipliers appear to vary greatly over time and space. + Based on VARs for a large number of countries, we document a + strong correlation between wealth inequality and the magnitude of + fiscal multipliers. In an attempt to account for this finding, we + develop a life-cycle, overlapping-generations economy with + uninsurable labor market risk. We calibrate our model to match + key characteristics of a number of OECD economies, including the + distribution of wages and wealth, social security, taxes, and + government debt and study how a fiscal multiplier depends on + various country characteristics. We find that the fiscal + multiplier is highly sensitive to the fraction of the population + who face binding credit constraints and also to the average + wealth level in the economy. These findings together help us + generate a cross-country pattern of multipliers that is quite + similar to that in the data.", + month = feb, + year = 2016, + language = "en" +} + +@ARTICLE{Bricker2016-xe, + title = "Measuring income and wealth at the top using administrative and + survey data", + author = "Bricker, Jesse and Henriques, Alice and Krimmel, Jacob and + Sabelhaus, John", + journal = "Brookings Pap. Econ. Act.", + publisher = "Johns Hopkins University Press", + volume = 2016, + number = 1, + pages = "261--331", + abstract = "Administrative tax data indicate that U.S. top income and wealth + shares are substantial and increasing rapidly (Piketty and Saez + 2003, Saez and Zucman 2014). A key reason for using + administrative data to measure top shares is to overcome the + under-representation of families at the very top that plagues + most household surveys. However, using tax records alone + restricts the unit of analysis for measuring economic resources, + limits the concepts of income and wealth being measured, and + imposes a rigid correlation between income and wealth. The Survey + of Consumer Finances (SCF) solves the under-representation + problem by combining administrative and survey data (Bricker et + al, 2014). Administrative records are used to select the SCF + sample and verify that high-end families are appropriately + represented, and the survey is designed to measure comprehensive + concepts of income and wealth at the family level. The SCF shows + high and rising top income and wealth shares, as in the ad + ministrative tax data. However, unadjusted, the levels and growth + based on administrative tax data alone appear to be substantially + larger. By constraining the SCF to be conceptually comparable, we + reconcile the differences, and show the extent to which + restrictions and rigidities needed to estimate top income and + wealth shares in the administrative data bias up levels and + growth rates.", + year = 2016 +} + +@ARTICLE{BewleyUnknown-yy, + title = "Interest Bearing Money Equilibrium Stock Capital", + author = "Bewley, T", + journal = "Manuscript" +} + +@ARTICLE{Benhabib2015-ed, + title = "The wealth distribution in Bewley economies with capital income + risk", + author = "Benhabib, Jess and Bisin, Alberto and Zhu, Shenghao", + journal = "J. Econ. Theory", + publisher = "Elsevier BV", + volume = 159, + pages = "489--515", + abstract = "We study the wealth distribution in Bewley economies with + idiosyncratic capital income risk. We show analytically that + under rather general conditions on the stochastic structure of + the economy, a unique ergodic distribution of wealth displays a + fat tail.", + month = sep, + year = 2015, + language = "en" +} + +@ARTICLE{Benhabib2011-hf, + title = "Distribution Wealth Fiscal Policy Economies Finitely Lived Agents", + author = "Benhabib, J and {Bisin} and Zhu, S", + journal = "Econometrica", + volume = 79, + number = 1, + pages = "123--157", + year = 2011 +} + +@ARTICLE{Benhabib2017-af, + title = "Earnings inequality and other determinants of wealth inequality", + author = "Benhabib, Jess and Bisin, Alberto and Luo, Mi", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 107, + number = 5, + pages = "593--597", + abstract = "We study the relation between the distribution of labor earnings + and the distribution of wealth. We show, theoretically as well as + empirically, that while labor earnings and precautionary savings + are important determinants of wealth inequality factors, they + cannot by themselves account for the thick tail of (the large top + shares in) the observed distribution of wealth. Other + determinants, like stochastic returns to wealth, as well as + savings rates and rates of returns increasing in wealth, need to + be accounted for.", + month = may, + year = 2017, + language = "en" +} + +@BOOK{Benhabib2015-rk, + title = "Wealth Distribution Social Mobility {US}: Quantitative Approach. + {NBER} Working Paper", + author = "Benhabib, J and {Bisin} and Luo, M", + year = 2015 +} + +@ARTICLE{Becker1980-pk, + title = "On the Long-Run steady state in a simple dynamic model of + equilibrium with heterogeneous households", + author = "Becker, Robert A", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 95, + number = 2, + pages = 375, + month = sep, + year = 1980 +} + +@ARTICLE{Bach2015-gh, + title = "Rich pickings? Risk, return, and skill in the portfolios of the + wealthy", + author = "Bach, Laurent and Calvet, Laurent E and Sodini, Paolo", + journal = "SSRN Electron. J.", + publisher = "Elsevier BV", + abstract = "This paper empirically investigates the portfolios of wealthy + households and their implications for the dynamics of inequality. + Using an administrative panel of all Swedish residents, we + document that returns on financial wealth are on average 4\% + higher per year for households in the top 1\% compared to the + median household. These high average returns are primarily + compensations for high levels of systematic risk. Abnormal + risk-adjusted returns, linked for instance to informational + advantages or exceptional investment skill, contribute only + marginally to the high returns of the wealthy. Implications for + inequality dynamics and public policy are discussed.", + year = 2015, + language = "en" +} + +@ARTICLE{Auclert2019-jm, + title = "Monetary policy and the redistribution channel", + author = "Auclert, Adrien", + journal = "Am. Econ. Rev.", + publisher = "American Economic Association", + volume = 109, + number = 6, + pages = "2333--2367", + abstract = "This paper evaluates the role of redistribution in the + transmission mechanism of monetary policy to consumption. Three + channels affect aggregate spending when winners and losers have + different marginal propensities to consume: an earnings + heterogeneity channel from unequal income gains, a Fisher channel + from unexpected inflation, and an interest rate exposure channel + from real interest rate changes. Sufficient statistics from + Italian and US data suggest that all three channels are likely to + amplify the effects of monetary policy. (JEL E21, E31, E43, E52)", + month = jun, + year = 2019, + language = "en" +} + +@ARTICLE{Aoki2017-nc, + title = "Zipf's law, Pareto's law, and the evolution of top incomes in the + United States", + author = "Aoki, Shuhei and Nirei, Makoto", + journal = "Am. Econ. J. Macroecon.", + publisher = "American Economic Association", + volume = 9, + number = 3, + pages = "36--71", + abstract = "We construct a tractable neoclassical growth model that generates + Pareto's law of income distribution and Zipf's law of the firm + size distribution from idiosyncratic, firm-level productivity + shocks. Executives and entrepreneurs invest in risk-free assets, + as well as their own firms' risky stocks, through which their + wealth and income depend on firm-level shocks. By using the + model, we evaluate how changes in tax rates can account for the + evolution of top incomes in the United States. The model matches + the decline in the Pareto exponent of the income distribution and + the trend of the top 1 percent income share in recent decades. + (JEL D31, H24, L11)", + month = jul, + year = 2017, + language = "en" +} + +@ARTICLE{Aiyagari1994-ka, + title = "Uninsured idiosyncratic risk and aggregate saving", + author = "Aiyagari, S R", + journal = "Q. J. Econ.", + publisher = "Oxford University Press (OUP)", + volume = 109, + number = 3, + pages = "659--684", + abstract = "We present a qualitative and quantitative analysis of the + standard growth model modified to include precautionary saving + motives and liquidity constraints. We address the impact on the + aggregate saving rate, the importance of asset trading to + individuals, and the relative inequality of wealth and income + distributions.", + month = aug, + year = 1994, + language = "en" +} + +@ARTICLE{Acemoglu2002-ry, + title = "Technical change, inequality, and the labor market", + author = "Acemoglu, Daron", + journal = "J. Econ. Lit.", + publisher = "American Economic Association", + volume = 40, + number = 1, + pages = "7--72", + abstract = "This essay discusses the effect of technical change on wage + inequality. I argue that the behavior of wages and returns to + schooling indicates that technical change has been skill-biased + during the past sixty years. Furthermore, the recent increase in + inequality is most likely due to an acceleration in skill bias. + In contrast to twentieth century developments, most technical + change during the nineteenth century appears to be + skill-replacing. I suggest that this is because the increased + supply of unskilled workers in the English cities made the + introduction of these technologies profitable. On the other hand, + the twentieth-century has been characterized by skill-biased + technical change because the rapid increase in the supply of + skilled workers has induced the development of + skill-complementary technologies. The recent acceleration in + skill bias is in turn likely to have been a response to the + acceleration in the supply of skills during the past several + decades.", + month = mar, + year = 2002 +}