Redistribution policies under capital market imperfection

Masaya Sakuragawa, Sakae Mitsui

Research output: Contribution to journalArticle

Abstract

We establish the existence and stability of the long-run wealth distribution in a credit constrained economy by applying the monotonicity condition developed by H. Hopenhayn and E. Prescott. There should emerge an egalitarian society in which all families experience upward and downward mobility, although a society of persistent inequality may occur in which rich entrepreneurs and poor lenders remain immobile between classes. The speed of transition from the latter to the former is shown to depend on the design of redistribution policies. Simulation results show that this occurs more rapidly when the government favours relatively rich lenders.

Original languageEnglish
Pages (from-to)94-113
Number of pages20
JournalJapanese Economic Review
Volume53
Issue number1
DOIs
Publication statusPublished - 2002 Jan 1
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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