Achdou, Yves, Han, Jiequn, Lasry, Jean Michel, Lions, Pierre Louis and Moll, Benjamin 
ORCID: 0009-0003-6067-359X
(2017)
Income and wealth distribution in macroeconomics: a continuous-time approach.
NBER Working Paper (23732).
National Bureau of Economic Research, Cambridge, MA.
Abstract
We recast the Aiyagari-Bewley-Huggett model of income and wealth distribution in continuous time. This workhorse model – as well as heterogeneous agent models more generally – then boils down to a system of partial differential equations, a fact we take advantage of to make two types of contributions. First, a number of new theoretical results: (i) an analytic characterization of the consumption and saving behavior of the poor, particularly their marginal propensities to consume; (ii) a closed-form solution for the wealth distribution in a special case with two income types; (iii) a proof that there is a unique stationary equilibrium if the intertemporal elasticity of substitution is weakly greater than one; (iv) characterization of “soft” borrowing constraints. Second, we develop a simple, efficient and portable algorithm for numerically solving for equilibria in a wide class of heterogeneous agent models, including – but not limited to – the Aiyagari-Bewley-Huggett model.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Official URL: | https://www.nber.org/papers.html |
| Additional Information: | © 2017 The Authors |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions |
| JEL classification: | D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions E - Macroeconomics and Monetary Economics > E0 - General > E00 - General E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth |
| Date Deposited: | 06 Nov 2019 16:30 |
| Last Modified: | 11 Dec 2024 19:31 |
| URI: | http://eprints.lse.ac.uk/id/eprint/102405 |
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