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Redistribution Policies under Capital Market Imperfection

Author

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  • Masaya Sakuragawa
  • Sakae Mitsui

Abstract

We establish the existence and stability of the long‐run wealth distribution in a credit constrained economy by applying the monotonicity condition developed by H. Hopenhayn and E. Prescott. There should emerge an egalitarian society in which all families experience upward and downward mobility, although a society of persistent inequality may occur in which rich entrepreneurs and poor lenders remain immobile between classes. The speed of transition from the latter to the former is shown to depend on the design of redistribution policies. Simulation results show that this occurs more rapidly when the government favours relatively rich lenders. JEL Classification Numbers: D31, G33, O12.

Suggested Citation

  • Masaya Sakuragawa & Sakae Mitsui, 2002. "Redistribution Policies under Capital Market Imperfection," The Japanese Economic Review, Japanese Economic Association, vol. 53(1), pages 94-113, March.
    • Handle: RePEc:bla:jecrev:v:53:y:2002:i:1:p:94-113
    DOI: 10.1111/1468-5876.00215
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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