NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part II: Equilibrium Wealth Distributions

Joseph E. Stiglitz

NBER Working Paper No. 21190
Issued in May 2015
NBER Program(s):Political Economy

This paper investigates the determination of the equilibrium distribution of income and wealth among individuals within a simple equilibrium growth model, where there is consistency between the movements of aggregate variables and the savings, bequest, and reproduction behavior of individuals. It describes centrifugal and centripetal forces, (leading to more or less unequal distributions), identifies the factors that may have contributed to the observed increase in inequality, and provides explicit expressions for the level of tail-inequality in terms of the underlying parameters of the economy and policy variables.

Among the key results are: (i) The magnitude of wealth inequality does not, in general depend on the difference between the rate of interest (r) and the rate of growth (g); the former is itself an endogenous variable that needs to be explained. In the standard generalization of the Solow model, in the long run not only is r < g, but sr < g (where s is the savings rate). (ii) An increase in capital taxation may be (and in some of the central models is) fully shifted, and so may not lead to lower levels of inequality. (iii) If the capital tax is progressive and/or the proceeds go to public investment, wealth inequality may be reduced the well-being of workers may be increased.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21190

Users who downloaded this paper also downloaded* these:
Stiglitz w21192 New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part IV: Land and Credit
Stiglitz w21191 New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part III: Life Cycle Savings vs. Inherited Savings
Stiglitz w20670 Unemployment and Innovation
Stiglitz w21189 New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part I. The Wealth Residual
Stiglitz w20517 Reconstructing Macroeconomic Theory to Manage Economic Policy
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us