INCOME AND WEALTH DISTRIBUTIONS ALONG THE BUSINESS CYCLE: IMPLICATIONS FROM THE NEOCLASSICAL GROWTH MODEL

Juan Mora (), Lilia Maliar and Serguei Maliar
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Juan Mora: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper studies the business cycle dynamics of the income and wealth distributions in the context of the neoclassical growth model where agents are heterogeneous in initial wealth and non-acquired skills. Our economy admits a representative consumer which enables us to characterize the distributive dynamics by aggregate dynamics. We show that inequality in both wealth and income follows a counter-cyclical pattern: the former is counter-cyclical because of cyclical fluctuations in labor income, while the latter is counter-cyclical due to the wealth-distribution effect. We find that the predictions of the model about the income distribution dynamics accord well with the U.S. data.

Keywords: neoclassical growth model; heterogeneous agents; aggregation (search for similar items in EconPapers)
JEL-codes: C68 D31 E32 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2003-01
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Citations: View citations in EconPapers (3)

Published by Ivie

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-02.pdf Fisrt version / Primera version, 2003 (application/pdf)

Related works:
Journal Article: Income and Wealth Distributions Along the Business Cycle: Implications from the Neoclassical Growth Model (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2003-02

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