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Effects of Aspirations and Habits on the Distribution of Wealth

We analyze how the introduction of habits and aspirations affects the distribution of wealth when the labor productivity of individuals is subject to idiosyncratic shocks and when bequests arise from a joy-of-giving motive. In the presence of either bequests or aspirations, labor income shocks are t...

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Published in:	The Scandinavian journal of economics 2014-10, Vol.116 (4), p.1012-1043
Main Authors:	Caballe, Jordi, Moro-Egido, Ana I
Format:	Article
Language:	English
Subjects:	Analysis Aspirations Autocorrelation Bequests Coefficients Consumer behavior Consumer economics Consumption D31 Distribution of wealth E21 E62 Economic shock Economic theory Habits Income distribution Labor economics Labour productivity Mathematical moments mobility Steady state economies Studies variability Wealth Wealth distribution
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description	We analyze how the introduction of habits and aspirations affects the distribution of wealth when the labor productivity of individuals is subject to idiosyncratic shocks and when bequests arise from a joy-of-giving motive. In the presence of either bequests or aspirations, labor income shocks are transmitted intergenerationally, and this transmission, together with contemporaneous shocks, determines the distribution of wealth. We show that the introduction of aspirations (habits) decreases (increases) the average wealth, and increases (decreases) both its intragenerational variability and the degree of intergenerational mobility. Therefore, a distinction between aspirations and habits is relevant because they involve different implications for the distribution of wealth.
doi_str_mv	10.1111/sjoe.12069
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J. of Economics</addtitle><description>We analyze how the introduction of habits and aspirations affects the distribution of wealth when the labor productivity of individuals is subject to idiosyncratic shocks and when bequests arise from a joy-of-giving motive. In the presence of either bequests or aspirations, labor income shocks are transmitted intergenerationally, and this transmission, together with contemporaneous shocks, determines the distribution of wealth. We show that the introduction of aspirations (habits) decreases (increases) the average wealth, and increases (decreases) both its intragenerational variability and the degree of intergenerational mobility. 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source	EconLit s plnými texty; International Bibliography of the Social Sciences (IBSS); Business Source Ultimate; JSTOR Archival Journals and Primary Sources Collection; Wiley-Blackwell Read & Publish Collection
subjects	Analysis Aspirations Autocorrelation Bequests Coefficients Consumer behavior Consumer economics Consumption D31 Distribution of wealth E21 E62 Economic shock Economic theory Habits Income distribution Labor economics Labour productivity Mathematical moments mobility Steady state economies Studies variability Wealth Wealth distribution
title	Effects of Aspirations and Habits on the Distribution of Wealth
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