This paper investigates the long-run nexus between wealth inequality and aggregate output using a DSGE model in which wealth inequality endogenously affects individual entrepreneurship incentives, thereby influencing aggregate output. Our model passes the indirect inference test against the UK...

A fundamental question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in tackling the question, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazine's listing of billionaires and...

Japan is in the midst of a protracted spell of depressed economic activity. Japan's economic stagnation has occurred against a background of rising earnings risk. Occupational stability is falling as routine occupations disappear and implicit lifetime employment guarantees are gradually...

Four alarming stylized facts have characterized the recent economic history of the United States: (i) a fall in labor productivity; (ii) a fall in the labor share, (iii) an increase in the capital income ratio, and (iv) an increase in the wealth share owned by top income earners. In this paper,...

This paper presents a model of secular stagnation, income and wealth distribution, and employment in the Classical Political Economy tradition, that can be contrasted with the accounts by Piketty (2014) and Gordon (2015). In these explanations, an exogenous reduction in the growth rate g...

Although it is often argued that wealth inequality matters more for economic growth than income inequality, this relationship has rarely been studied empirically, with a few exceptions covering a very restricted country sample or short timeframe. Leveraging hitherto unexploited wealth inequality...

Although urban China has experienced spectacular income growth over the last two decades, increases in inequality, reduction in social welfare provision, deregulation of grain prices, and increases in income uncertainty in the 1990s have increased urban poverty. Using a large repeated...

This paper is dedicated to the empirical exploration of the welfare effect of expectations and progress per se. Using ten waves of the Russian Longitudinal Monitoring Survey, a panel household survey rich in subjective variables, the analysis suggests that for a given total stock of...

This note presents a simple model of Hirschman and Rothschild’s (1973) tunnel effect, which is generally interpreted as reducing inequality aversion. The model identifies two separate tunnel effects, associated with own-sector and inter-sector productivity shocks, that are closely related to...

This paper investigates the channels through which the middle class may matter for consumption growth and development. Determinants of the size and the growth of the middle class are also examined. Using several different middle class measures and a panel of 72 developing countries spanning the...