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Heterogeneous time preferences and the distribution of wealth

Authors
Journal
Mathematical Social Sciences
0165-4896
Publisher
Elsevier
Publication Date
Volume
9
Issue
1
Identifiers
DOI: 10.1016/0165-4896(85)90008-3
Keywords
  • Inequality
  • Capital Theory
  • Optimal Saving
  • Time Preference

Abstract

Abstract This paper shows that when households are heterogeneous with respect to time preference, the capital market functions as a powerful mechanism generating and maintaining a highly skewed distribution of wealth. A simple model of household savings is embedded into (1) a consumption loans economy and (2) a productive capital economy. The robustness of the conclusions is tested by relaxing some of the simplifying assumptions. Various counteracting instruments of social policy are discussed.

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