A Representative Consumer Theory of Distribution

This paper introduces various sources of consumer heterogeneity in one-sector representative consumer (RC) growth models and develops tools to study the evolution of the distribution of consumptions, assets, and incomes. These tools are applied to the Ramsey-Cass-Koopmans model of optimal savings an...

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Bibliographic Details
Published in:The American economic review 2000-09, Vol.90 (4), p.909-926
Main Authors: Caselli, Francesco, Ventura, Jaume
Format: Article
Language:English
Subjects:
Conditional convergence
Consumer assets
Consumer behavior
Consumer economics
Consumer goods
Consumer tastes
Economic growth models
Economic models
Growth models
Income distribution
Steady state economies
Wealth
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Summary:This paper introduces various sources of consumer heterogeneity in one-sector representative consumer (RC) growth models and develops tools to study the evolution of the distribution of consumptions, assets, and incomes. These tools are applied to the Ramsey-Cass-Koopmans model of optimal savings and the Arrow-Romer model of productive spillovers. The RC property per se places very few restrictions on the nature of observed distributions, and a wide range of distributive dynamics and income mobility patterns can arise as the equilibrium outcome. An example illustrates how to use these tools to generate quantitative predictions and compare them to the data.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.90.4.909