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An impossibility theorem for wealth in heterogeneous-agent models with limited heterogeneity

Stachurski, John; Toda, Alexis Akira


It has been conjectured that canonical Bewley–Huggett–Aiyagari heterogeneous-agent models cannot explain the joint distribution of income and wealth. The results stated below verify this conjecture and clarify its implications under very general conditions. We show in particular that if (i) agents are infinitely-lived, (ii) saving is risk-free, and (iii) agents have constant discount factors, then the wealth distribution inherits the tail behavior of income shocks (e.g., light-tailedness or the...[Show more]

CollectionsANU Research Publications
Date published: 2019-04-12
Type: Journal article
Source: Journal of Economic Theory
DOI: 10.1016/j.jet.2019.04.001


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