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
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)
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

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Best, James
  • Dogra, Keshav
  • Federal Reserve Bank of New York

Entstanden

  • 2023

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