IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v78y2024i4d10.1007_s00199-024-01581-w.html
   My bibliography  Save this article

Left and right: a tale of two tails of the wealth distribution

Author

Listed:
  • Marcello D’Amato

    (University of Napoli Suor Orsola Benincasa
    CSEF)

  • Christian Di Pietro

    (University of Napoli Parthenope
    CRISEI)

  • Marco M. Sorge

    (CSEF
    University of Salerno)

Abstract

We study a model of wealth accumulation in altruistic lineages, in which households face uninsurable risk, investment indivisibilities and borrowing constraints. A thick upper tail of the stationary distribution of wealth is shown to emerge as a robust prediction, irrespective of (1) the presence of multidimensional (wealth and ability) heterogeneity and non-convexities in human capital formation, and (2) the nature of parental bequest motives (joy-of-giving vs. paternalism). Additionally, (3) we identify conditions under which the unique, ergodic wealth distribution exhibits a mass point at the bottom of its support, where credit market imperfections continue to affect, along the convergence process, the structure of wealth transitions at the lineage level. Motivated by these results, we then analyze the sensitivity of the left tail to various frictions and fiscal instruments that affect bequest strategies and the ensuing transmission of wealth across generations. In particular, capital income or bequest taxes with no redistribution may reinforce economic mechanisms underpinning mobility traps in the left tail, thereby increasing the persistence of households in the lowest tiers of the wealth distribution.

Suggested Citation

  • Marcello D’Amato & Christian Di Pietro & Marco M. Sorge, 2024. "Left and right: a tale of two tails of the wealth distribution," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1389-1433, December.
    • Handle: RePEc:spr:joecth:v:78:y:2024:i:4:d:10.1007_s00199-024-01581-w
    DOI: 10.1007/s00199-024-01581-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00199-024-01581-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00199-024-01581-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Wealth distribution; Wealth inequality; Capital income risk; Credit market imperfections; Educational investment;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:78:y:2024:i:4:d:10.1007_s00199-024-01581-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.