Arbeitspapier
Capital management and wealth inequality
Wealthier individuals have stronger incentives to seek higher returns. We investigate theoretically the effect this has on long-run wealth inequality. Incorporating capital management into a standard RamseyCass-Koopmans model generates substantial long-run inequality: the majority of the population works and holds no capital, while a small minority holds a large amount of capital and manages it full-time. Counterintuitively, financial innovations or policies that reduce return differentials increase long-run wealth inequality. Egalitarian steady states may exist, but are inefficient and unstable: a small concentration in capital ownership causes a transition to an unequal steady state. Capital management introduces a novel equity-efficiency tradeoff: scale economies make it efficient for a few individuals to manage capital full-time, but under laissez-faire this generates substantial inequality. A utilitarian planner would instead instruct a few individuals to manage capital on behalf of society and transfer most of their income to the workers.
- Sprache
-
Englisch
- Erschienen in
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Series: Staff Report ; No. 1072
- Klassifikation
-
Wirtschaft
Personal Income, Wealth, and Their Distributions
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Macroeconomics: Consumption; Saving; Wealth
Investment; Capital; Intangible Capital; Capacity
- Thema
-
wealth inequality
capital
returns
management
information
financial innovation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Best, James
Dogra, Keshav
- Ereignis
-
Veröffentlichung
- (wer)
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Federal Reserve Bank of New York
- (wo)
-
New York, NY
- (wann)
-
2023
- DOI
-
doi:10.59576/sr.1072
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Best, James
- Dogra, Keshav
- Federal Reserve Bank of New York
Entstanden
- 2023