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The Role of Productivity Growth Rates for Rising Inequality in an Economy with Heterogeneous Agents

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  • KONDO Atsumasa

Abstract

This paper examines the dynamic properties of equilibrium paths in a simple general equilibrium model with heterogeneous agents. Heterogeneity is characterized by productivity growth rates in addition to the discount factors of agents for their future utilities. The consumption levels of impatient agents converge to 0 as time passes if their discount factors are sufficiently small and their productivity growth rates are not too high. The result can be interpreted as the emergence of rising inequality. The sufficient conditions can be reworded as follows: the discount factors of impatient agents are smaller than the "market's long-term discount factor", i.e., 1/(1+r).

Suggested Citation

  • KONDO Atsumasa, "undated". "The Role of Productivity Growth Rates for Rising Inequality in an Economy with Heterogeneous Agents," ESRI Discussion paper series 326, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:326
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    References listed on IDEAS

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    More about this item

    Keywords

    inequality; heterogeneous agents; productivity growth rates; discount factors JEL Classification Numbers: D24; D31;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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