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Comparing inequality and mobility in linear models

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  • Peng, Baochun

Abstract

This note shows that income risk and capital risk affect mobility and inequality asymmetrically in the linear model analysed by Zhu (2013). Inequality responds to changes in both income risk and capital risk, while mobility responds to changes in capital risk and may not respond to changes in income risk. Consequently, income tax reduces wealth inequality without affecting wealth mobility, while tax on capital returns reduces wealth inequality and increases wealth mobility.

Suggested Citation

  • Peng, Baochun, 2018. "Comparing inequality and mobility in linear models," Economics Letters, Elsevier, vol. 168(C), pages 155-157.
    • Handle: RePEc:eee:ecolet:v:168:y:2018:i:c:p:155-157
    DOI: 10.1016/j.econlet.2018.04.014
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    References listed on IDEAS

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    1. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, January.
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    4. Zhu, Shenghao, 2013. "Comparisons of stationary distributions of linear models," Economics Letters, Elsevier, vol. 119(2), pages 221-223.
    5. Anthony Atkinson, 2011. "On lateral thinking," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(3), pages 319-328, September.
    6. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, May.
    7. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1553-1623.
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    Cited by:

    1. Di Pietro, Christian & Sorge, Marco M., 2018. "Comparing inequality and mobility in linear models: Comment," Economics Letters, Elsevier, vol. 172(C), pages 56-58.
    2. Christian Di Pietro & Mariafortuna Pietroluongo & Marco M. Sorge, 2023. "Stochastic Ordering of Stationary Distributions of Linear Recurrences: Further Results and Economic Applications," Economies, MDPI, vol. 11(4), pages 1-10, April.

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    More about this item

    Keywords

    Equality of opportunity; Inequality; Mobility; Wealth; Income;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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