NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Age, Luck, and Inheritance

Jess Benhabib, Shenghao Zhu

NBER Working Paper No. 14128
Issued in June 2008
NBER Program(s):   EFG

We present a mechanism to analytically generate a double Pareto distribution of wealth in a continuous time OLG model with optimizing agents who have bequest motives, are subject to stochastic returns on capital and have uncertain lifespans. We disentangle, roughly, the contribution of inheritance, age and stochastic rates of capital return to wealth inequality, in particular to the Gini coefficient. We investigate the role of the fiscal and redistributive policies for wealth inequality and social welfare.

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Document Object Identifier (DOI): 10.3386/w14128

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