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A Positive Theory of Consumption Distribution

초록/요약

Permanent heterogeneities are introduced in a dynamic stochsatic general equilibrium model and the distribution of consumption is studied. Closed form solutions are obtained and the followings are found. First, with the permanent heterogeneties, we can show that there exists a unique saddle path equilibrium and a distribution of consumption which are associated with an initial period asset distribution. Second, individual consumptions can be made equal as much as we want. However, equalizing consumptions requires a redistribution of initial assets and the dispersions of resulting asset and income distribution are incredibly larger than that of the case of benchmark unequal consumptions. Third, the results can be extended to the case of permanent shocks to individual productivities. With the modi¯cation, we may have some ex post mobility in income and wealth. However, the results without income mobility may be preserved in an expected sense.

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