Instantaneous Wealth Distribution in a Perpetual Youth Model

Antonio Scialà

doi:10.4236/me.2016.714146

Abstract

The Perpetual Youth model is widely used in macroeconomics to assess the intergenerational effects of fiscal and monetary policy. Little attention has been devoted to the effects in terms of instantaneous wealth distribution. In this paper, the instantaneous non-human wealth distribution that characterizes the steady state equilibrium of a Perpetual Youth model is assessed and, for this scope, a Generalized Lorenz Curve of wealth distribution at the steady state equilibrium is derived. I find that: i) an increase in interest rates increases financial wealth concentration; ii) economies with a higher population turnover rates exhibit lower financial wealth concentration.

Highlights

Thanks to its analytical tractability, the Perpetual Youth (PY) model has been extensively used by various strands of literature in economics
The Perpetual Youth model is widely used in macroeconomics to assess the intergenerational effects of fiscal and monetary policy
Given the demographic structure underling the PY model, in steady state older individuals owns a greater level of non-human wealth than younger individuals, while the size of the older population is smaller than the size of the younger one; the state of non-human wealth distribution is uncertain

Summary

Introduction

Thanks to its analytical tractability, the Perpetual Youth (PY) model has been extensively used by various strands of literature in economics. As it is well known, PY model is an overlapping generation model in continuous time. The aim of this paper is to assess the instantaneous non-human wealth distribution that characterizes the steady state equilibrium of a PY model introduced by [1]1. For this scope, we derive a Generalized Lorenz Curve of wealth distribution at the steady state equilibrium

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The Perpetual Youth Framework

Instantaneous Wealth Distribution in a PY Model

Comparative Statics

Conclusion