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Quantitative Models of Wealth Inequality: A Survey

Mariacristina De Nardi

NBER Working Paper No. 21106
Issued in April 2015, Revised in June 2015
NBER Program(s):Public Economics

While in the data wealth is concentrated in the hands of a small number of rich people and the saving rate of the rich is high, many models used for quantitative policy evaluation fail to match these facts. In addition, some of the models that succeed in matching these facts have radically different policy implications, depending on the nature and strength of the saving motives assumed. This paper surveys the savings mechanisms proposed so far (preference heterogeneity, transmission of bequests and human capital across generations, entrepreneurship, and high earnings risk for the top earners) and argues that more work is needed to understand wealth inequality and the saving motives behind it, and to evaluate policy more reliably.

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Document Object Identifier (DOI): 10.3386/w21106

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