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The Stationery Distribution of Wealth with Random Shocks

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Abstract

A convergence model with wealth accumulation subject to i.i.d. random shocks is examined. The transfer function shows what k_{t+1} - wealth at t+1 - would be, given k_t, with no shock: It has a positive slope, but its concavity/convexity is indeterminate. The stationary distribution of wealth satisfies a Fredholm integral equation. This distribution can be examined by direct analysis of the wealth-accumulation stochastic process and via the Fredholm equation. The analysis resembles some econometric theory of time series. Economic theory forces consideration of a broad range of cases, including some which violate B-convergence. "Twin peaks" in the stationary distribution cannot be excluded.

Suggested Citation

  • Christopher Bliss, 2002. "The Stationery Distribution of Wealth with Random Shocks," Economics Papers 2002-W6, Economics Group, Nuffield College, University of Oxford.
    • Handle: RePEc:nuf:econwp:0206
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    References listed on IDEAS

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    More about this item

    Keywords

    Convergence; stochastic process; wealth distribution;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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