Authors:	Birkner, Matthias Scheuer, Niklas Wälde, Klaus
Title:	The dynamics of Pareto distributed wealth in a small open economy
Online publication date:	15-Feb-2024
Year of first publication:	2023
Language:	english
Abstract:	We study a small open economy with labor, capital accumulation, random death, taxation and a government budget balanced in the long run. We offer methods that provide ordinary differential equations for means and analytical expressions for densities. The latter is achieved by solving stochastic differential equations analytically and deriving the density from this solution. Starting from any distribution, the aggregate distribution converges, both on a transition path towards a steady state and on a transition path towards balanced growth, to a Pareto-distribution. We provide an intuitive economic interpretation for a stationary long-run density with an infinite mean in an economy on a balanced growth path. We also show how government tax policy can lead to non-monotonic links between the equilibrium growth rate of the economy and risk aversion of households.
DDC:	330 Wirtschaft 330 Economics
Institution:	Johannes Gutenberg-Universität Mainz
Department:	FB 03 Rechts- und Wirtschaftswissenschaften
Place:	Mainz
ROR:	https://ror.org/023b0x485
DOI:	http://doi.org/10.25358/openscience-10089
Version:	Published version
Publication type:	Zeitschriftenaufsatz
Document type specification:	Scientific article
License:	CC BY
Information on rights of use:	https://creativecommons.org/licenses/by/4.0/
Journal:	Economic theory 76
Pages or article number:	607 644
Publisher:	Springer Nature
Publisher place:	Berlin; Heidelberg; New York
Issue date:	2023
ISSN:	1432-0479
Publisher DOI:	10.1007/s00199-022-01471-z
Appears in collections:	DFG-491381577-H