The distributions of wealth in the US and many other countries are strikingly concentrated on the top and skewed to the right. To explain the income and wealth inequality, we provide a tractable heterogeneous-agent model with incomplete markets in continuous time. We separate illiquid capital...

China is now facing the challenges of high leverage. Our study has examined the role of firms’ rising debt in explaining the decrease in labor share in recent years. We developed a model to show that firms may strategically use debt to increase their bargaining power, resulting in lower labor...