Journal Article

Zero Growth and Long-Run Inequality


Abstract: Using a basic model to study both wealth and income inequality and their relations to long-run economic growth may lead to questionable conclusions. We consider a more complex model that includes realistic variation in the levels of income and wealth across households in addition to a new ingredient, luck in each household?s labor productivity. Using this model,we determine that existing estimates of the elasticity of substitution between capital and labor are generally far away from the region where inequality would explode if long-run growth were zero.

Access Documents

File(s): File format is text/html https://doi.org/10.26509/frbc-ec-201511
Description: Full Text

Authors

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2015

Issue: September

Order Number: 11