Pareto Distributions in Economic Growth Models
Nirei, Makoto
WP#09-05 Hitotsubashi University IIR (2009/07/22)
This paper analytically demonstrates that the tails of income and wealth distributions converge to a Pareto distribution in a variation of the Solow or Ramsey growth model where households bear idiosyncratic investment shocks. The Pareto exponent is shown to be decreasing in the shock variance, increasing in the growth rate, and increa…