Working Paper: CEPR ID: DP5552
Authors: Matthias Doepke; Martin Schneider
Abstract: This paper shows that a zero-sum redistribution of wealth within a country can have persistent aggregate effects. Motivated by the case of an unanticipated inflation episode, we consider redistribution shocks that shift resources from old to young households. Aggregate effects arise because there are asymmetries in the reaction of winners and losers to changes in wealth. We focus on two sources of asymmetries: differences in the average age of winners and losers, and differences in their labour force status.
Keywords: aggregate effects; inflation; redistribution
JEL Codes: D31; D58; E31; E50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| zero-sum redistribution of wealth (H23) | persistent changes in aggregate labor supply (J29) |
| zero-sum redistribution of wealth (H23) | persistent changes in output (D57) |
| younger households respond more strongly to wealth changes (G59) | aggregate labor supply increases (J20) |
| older households lose wealth (G51) | aggregate labor supply increases (J20) |
| younger households gaining wealth (G51) | higher aggregate output (E23) |
| younger households gaining wealth (G51) | younger households increase savings (D14) |