Working Paper: NBER ID: w20157
Authors: Jess Benhabib; Alberto Bisin; Shenghao Zhu
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; more precisely, a Pareto distribution in the right tail.
Keywords: wealth distribution; Bewley models; capital income risk; Pareto distribution
JEL Codes: E13; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| idiosyncratic capital income risk (G19) | unique stationary distribution of wealth (D39) |
| unique stationary distribution of wealth (D39) | fat right tail (Pareto distribution) (C46) |
| capital income risk (E25) | properties of the right tail of the wealth distribution (D39) |
| capital income risk (E25) | wealth inequality through savings behavior (D14) |
| consumption function under borrowing constraints (D10) | wealth inequality (D31) |