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Wealth distribution and fiscal policy

Author

Listed:
  • Sandrine CATANIA

    (GREQAM-Université de la Méditerranée (France))

Abstract

This paper examines the long-run equilibrium wealth distribution in the context of a general equilibrium model in which heterogeneous agents are born into dynasties. When agents are born they are randomly assigned to be either altruists or egoists. An altruistic agent cares about his progeny and so consumes part of his income (wages plus bequest) and bequeaths the rest to his heirs. These bequests determine the capital stock next period. An egoistic agent consumes all his income (wages plus bequests) leaving nothing to his heirs. Assuming that the probability that an altruist (egoist) is born to an altruist or an egoist follows a fisrt-order Markov process, and given initial conditions on the distribution of wealth and bequests, the equilibrium (numerically) solved. This done, two fiscal policy tax / intragenerational transfer regimes are evaluated in terms of individual welfare and the distribution of Wealth.

Suggested Citation

  • Sandrine CATANIA, 1998. "Wealth distribution and fiscal policy," Discussion Papers (REL - Recherches Economiques de Louvain) 1998041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1998041
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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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