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Heterogeneity in macroeconomics: the compositional inequality perspective

Ranaldi, Marco and Palagi, Elisa (2022) Heterogeneity in macroeconomics: the compositional inequality perspective. International Inequalities Institute Working Papers (85). London School of Economics and Political Science, London, UK.

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This work presents a framework to jointly study individuals’ heterogeneity in terms of their capital and labor endowments (endowment heterogeneity) and of their saving and consumption behaviors (behavioral heterogeneity), from an empirical perspective. By adopting a newly developed synthetic measure of compositional inequality, this work classifies more than 20 economies across over two decades on the basis of their heterogeneity characteristics. Modern economies are far from being characterized by agents with same propensities to save and consume and same endowments (Representative Agent systems), or by the existence of rich capital-abundant savers and poor hand-to-mouth consumers (Kaldorian systems). Our framework and results are discussed in light of the heterogeneity assumptions underlying several types of macroeconomic models with heterogeneous agents (Kaldorian, TANK & HANK, OLG, and ABM models). A negative relationship between behavioral heterogeneity and the economy’s saving rate is also documented.

Item Type: Monograph (Working Paper)
Official URL:
Additional Information: © 2022 The Authors
Divisions: International Inequalities Institute
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
P - Economic Systems > P1 - Capitalist Systems > P10 - General
Date Deposited: 18 Oct 2022 10:51
Last Modified: 22 Feb 2023 00:07

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