The Wealth Distribution in Bewley Models with Investment Risk

Jess Benhabib; Alberto Bisin; Shenghao Zhu

doi:10.3386/w20157

The Wealth Distribution in Bewley Models with Investment Risk

Jess Benhabib, Alberto Bisin & Shenghao Zhu

Working Paper 20157

DOI 10.3386/w20157

Issue Date May 2014

Revision Date October 2014

We study the wealth distribution in Bewley economies with idiosyncratic capital income risk. We show analytically that under rather general conditions on the stochastic structure of the economy, a unique ergodic distribution of wealth displays a fat tail; more precisely, a Pareto distribution in the right tail.

This paper was previously circulated as "The Wealth Distribution in Bewley Economies with Investment Risk." Thanks to Ben Moll for kindly providing us with very useful detailed comments and to Yi Lu for precious suggestions regarding various computational aspects. We also gratefully acknowledge the exceptionally expert research assistantship of Simon Mongey on the simulations. Shenghao Zhu acknowledges the financial support from National University of Singapore (R-122-000-175-112). Corresponding author's email: alberto.bisin@nyu.edu. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
MARC RIS BibTeΧ
- May 20, 2014
- October 26, 2014

The Wealth Distribution in Bewley Models with Investment Risk

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