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Why do the rich save more? A theory and Australian evidence

Chakrabarty, Debajyoti; Katayama, Hajime; MASLEN, HANNA

Description

We provide a theory to explain the existence of inequality in an economy where agents have identical preferences and have access to the same production technology. Agents consume a 'health' good which determines their subjective discount factor. Depending on initial distribution of capital the economy gets separated into different permanent-income groups. This leads to a testable hypothesis: 'The rich save a larger proportion of their permanent-income'. We test this implication for savings...[Show more]

CollectionsANU Research Publications
Date published: 2008
Type: Journal article
URI: http://hdl.handle.net/1885/32515
Source: The Economic Record
DOI: 10.1111/j.1475-4932.2008.00481.x

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