Inequality and Aggregate Savings in the Neoclassical Growth Model
Abstract
Within the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporal elasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.
Date Issued
2010-08
Publication Type
Working Paper
Language(s)
en
Additional Credits
Publisher
Department of Economics
Access(Rights)
open.access