Affiliation:
1. Department of Economics, Columbia University
2. Department of Economics, University of California San Diego
Abstract
We develop an analytical framework designed to solve and analyze heterogeneous‐agent models that endogenously generate fat‐tailed wealth distributions. We exploit the asymptotic linearity of policy functions and the analytical characterization of the Pareto exponent to augment the conventional solution algorithm with a theory of the tail. Our framework allows for a precise understanding of the very top of the wealth distribution (e.g., analytical expressions for top wealth shares, type distribution in the tail, and transition probabilities in and out of the tail) in addition to delivering improved accuracy and speed.
Funder
Australian National University
City University of New York
University of California, Santa Barbara
University of California, San Diego
University of New South Wales
University of Tokyo
Subject
Economics and Econometrics
Cited by
7 articles.
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