In theory, and under some quite strong assumptions, there exists a tight quantitative relationship among the following four fundamental economic concepts: (1) “wealth”; (2) “income”; (3)“sustainability”; (4) “accounting”. These four basic concepts are placed in quotation marks here because a necessary first step will be to carefully and rigorously define what exactly is meant by each concept. I...

Income and wealth differ over the life cycle. In cross-sectional distributions of income or wealth, classical inequality measures such as the Gini, could therefore find substantial inequality even if everyone have the same life-time income or wealth. We describe the AG index (Almås and Mogstad, 2011) which is a generalization of the classical Gini index with attractive properties, and we provid...

Understanding rising wealth inequality requires a comprehension of the evolution distributions. We quantify model idiosyncratic labor income and interest rates to match distribution NLSY 79 cohort in US from 1986 2008. allow for economic growth, stochastic rates. Individuals differ their financial ability, i.e. average returns. Aggregating over individuals balances stationary long-run (for low ...

We derive asset-pricing and portfolio-choice implications of a dynamic incomplete-markets model in which consumers are heterogeneous in several respects: labor income, asset wealth, and preferences. In contrast to earlier papers, we insist on at least roughly matching the model’s implications for heterogeneity—notably, the equilibrium distributions of income and wealth—with those in U.S. data. ...

In the last decade, a large body of literature has been developed to explain the universal features of inequality in terms of income and wealth. By now, it is established that the distributions of income and wealth in various economies show a number of statistical regularities. There are several models to explain such static features of inequality in an unifying framework and the kinetic exchan...

We analyze how the agent’s initial wealth affects the principal’s expected profits in the standard principal-agent model with moral hazard. We show that if the principal prefers a poorer agent for all specifications of action sets, probability distributions, and disutility of effort, then the agent’s utility of income must exhibit a coefficient of absolute prudence less than three times the coe...

In this paper we …rst use the Italian Survey of Household Income and Wealth to document how various household choices (including consumption and wealth) change in response to an income change. We show that these responses are not consistent with simple benchmark models (i.e. complete markets or hands to mouth consumers). In particular, we …nd evidence of signi…cant asymmetries in how consumptio...