Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/214972 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7970
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Labour income follows a deterministic growth trend and fluctuates between two values. Interest rates are drawn initially, fluctuate between two values and can differ in their arrival rates. Low interest rates imply a stationary long-run wealth distribution, high interest rates imply exploding wealth dynamics. When matching the NLSY 79 evolution of the wealth distribution from 1986 to 2008, we obtain a fit of 96:1%: With a more flexible interest rate distribution, employing "superstar states", the fit can increase to 96:7%. For the fit of 96:1%, the standard deviation of model returns is much lower than the empirical standard deviation.
Subjects: 
dynamics of wealth distributions
NLSY 1979 cohort
capital income risk
Fokker-Planck equations
JEL: 
C60
D30
E20
Document Type: 
Working Paper
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