Income and Wealth Heterogeneity in the Macroeconomy

  title={Income and Wealth Heterogeneity in the Macroeconomy},
  author={Per Krusell and Tony Smith},
How do movements in the distribution of income and wealth affect the macroeconomy? We analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity. Our main finding is that, in the stationary stochastic equilibrium, the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution. This result is robust to substantial changes in… CONTINUE READING
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