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| Mohsen Mohaghegh |
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| ''A note on income risks and their implications for wealth concentration'' |
| ( 2025, Vol. 45 No.1 ) |
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| Income risks are not accurately captured by standard AR processes that are common in the literature. This paper proposes a simple stochastic process which matches several moments in the data including the cross-sectional distribution of income and the distribution income risk, and can be easily used in models with uninsurable income risk. Incorporating this process into an off-the-shelf OLG model leads to a rise in wealth concentration narrowing the gap between traditional models and the data. However, the right tail of the wealth distribution remains significantly thinner than the data. |
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| Keywords: Incomplete Markets, Earning Risks, Precautionary Savings, Wealth Concentration |
JEL: D3 - Distribution: General
C6 - Mathematical Methods and Programming: General |
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| Manuscript Received : Aug 07 2024 | | Manuscript Accepted : Mar 30 2025 |
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