The Long-Run Behavior of Consumption and Wealth Dynamics in Complete Financial Market with Heterogeneous Investors

Journal of Applied Mathematics ◽

10.1155/2014/482314 ◽

2014 ◽

Vol 2014 ◽

pp. 1-16

Author(s):

Darong Dai

Keyword(s):

Financial Market ◽

Heterogeneous Beliefs ◽

Wealth Accumulation ◽

Consumption Tax ◽

Discount Rates ◽

Intertemporal Substitution ◽

Uniform Topology ◽

Long Run ◽

Time Discount ◽

Wealth Tax

A type of complete financial market with finite and countable heterogeneous investors, that is, investors equipped with heterogeneous elasticities of intertemporal substitution, heterogeneous time discount rates, and also heterogeneous beliefs, is constructed and two main results are established. First, long-run behaviors, specifically golden rules or modified golden rules, about consumption path and wealth accumulation are investigated under uncertainty and in the sense of uniform topology. Second, inefficacy of temporary taxation policies, which are chosen to be consumption tax and wealth tax, is confirmed in the current financial market.

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INFRASTRUCTURE AND INEQUALITY: INSIGHTS FROM INCORPORATING KEY ECONOMIC FACTS ABOUT HOUSEHOLD HETEROGENEITY

Macroeconomic Dynamics ◽

10.1017/s1365100516000432 ◽

2016 ◽

Vol 22 (4) ◽

pp. 864-895 ◽

Cited By ~ 3

Author(s):

David Klenert ◽

Linus Mattauch ◽

Ottmar Edenhofer ◽

Kai Lessmann

Keyword(s):

Public Investment ◽

Wealth Accumulation ◽

Consumption Tax ◽

Income Source ◽

Long Run ◽

Labor Tax ◽

Equity And Efficiency ◽

Capital Tax ◽

Household Heterogeneity ◽

Pareto Improving

We study the impacts of investment in public capital on equity and efficiency. Taking into account stylized facts on wealth accumulation, we model agent heterogeneity through differences in saving behavior, income source and time preference. We find that in the long run, public investment is Pareto-improving and that it reduces inequality in wealth, welfare, and income at the same time, if it is financed by a capital tax. Consumption tax financing is also Pareto-improving but distribution-neutral. Only for labor tax financing, a trade-off between equity and efficiency occurs. Additionally, we find that agents differ in their preferred tax rates.The results for capital and labor tax financing are valid for both, the case of decreasing and constant returns to accumulable factors.

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Wealth Taxation and Wealth Accumulation: Theory and Evidence From Denmark*

The Quarterly Journal of Economics ◽

10.1093/qje/qjz032 ◽

2019 ◽

Vol 135 (1) ◽

pp. 329-388 ◽

Cited By ~ 8

Author(s):

Katrine Jakobsen ◽

Kristian Jakobsen ◽

Henrik Kleven ◽

Gabriel Zucman

Keyword(s):

Behavioral Responses ◽

Reduced Form ◽

Wealth Accumulation ◽

Tax Rates ◽

Cycle Model ◽

Specific Design ◽

Long Run ◽

Marginal Tax Rates ◽

Quasi Experimental ◽

Wealth Tax

Abstract Using administrative wealth records from Denmark, we study the effects of wealth taxes on wealth accumulation. Denmark used to impose one of the world’s highest marginal tax rates on wealth, but this tax was greatly reduced starting in 1989 and later abolished. Due to the specific design of the wealth tax, the 1989 reform provides a compelling quasi-experiment for understanding behavioral responses among the wealthiest segments of the population. We find clear reduced-form effects of wealth taxes in the short and medium run, with larger effects on the very wealthy than on the moderately wealthy. We develop a simple life cycle model with utility of residual wealth (bequests) allowing us to interpret the evidence in terms of structural primitives. We calibrate the model to the quasi-experimental moments and simulate the model forward to estimate the long-run effect of wealth taxes on wealth accumulation. Our simulations show that the long-run elasticity of taxable wealth with respect to the net-of-tax return is sizable at the top of the distribution.

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LEARNING DYNAMICS AND NONLINEAR MISSPECIFICATION IN AN ARTIFICIAL FINANCIAL MARKET

Macroeconomic Dynamics ◽

10.1017/s1365100509080262 ◽

2009 ◽

Vol 13 (5) ◽

pp. 625-655 ◽

Cited By ~ 3

Author(s):

Christophre Georges ◽

John C. Wallace

Keyword(s):

Time Series ◽

Financial Market ◽

Consistency Condition ◽

Nonlinear Structure ◽

State Variable ◽

Bounded Memory ◽

Long Run ◽

Finite Memory ◽

Aggregate Dynamics ◽

True Structure

In this paper, we explore the consequence of learning to forecast in a very simple environment. Agents have bounded memory and incorrectly believe that there is nonlinear structure underlying the aggregate time series dynamics. Under social learning with finite memory, agents may be unable to learn the true structure of the economy and rather may chase spurious trends, destabilizing the actual aggregate dynamics. We explore the degree to which agents' forecasts are drawn toward a minimal state variable learning equilibrium as well as a weaker long-run consistency condition.

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From Shareholder Value to CEO Power: The Paradox of the 1990s

Competition & Change ◽

10.1179/102452905x38623 ◽

2005 ◽

Vol 9 (1) ◽

pp. 7-47 ◽

Cited By ~ 47

Author(s):

Robert Boyer

Keyword(s):

Financial Market ◽

Moral Philosophy ◽

Bargaining Power ◽

Stock Options ◽

Ceo Power ◽

Economic Theories ◽

Long Run ◽

Legal Sanctions ◽

Top Manager ◽

Wage Earners

Why did CEO remuneration explode during the 1990s and persist at high levels, even after the Internet bubble burst? This article surveys the alternative explanations that have been given of this paradox, mainly by various economic theories with some extension to political science, business administration, social psychology, moral philosophy and network analysis. It is argued that the diffusion of stock options and financial market-related incentives, supposed to discipline managers, have entitled them to convert their intrinsic power into remuneration and wealth, both at micro and macro level. This is the outcome of a de facto alliance of executives with financiers, who have exploited the long-run erosion of wage earners' bargaining power. The article also discusses the possible reforms that could reduce the probability and the adverse consequences of CEO and top-manager opportunism: reputation, business ethic, legal sanctions, public auditing of companies, or a shift from a shareholder to a stakeholder conception.

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From Subordination to Autonomy: Public Debt Policies and the Creation of a Self-Ruled Financial Market in the Kingdom of Naples in the Long Run (1500–1800) – Gaetano Sabatini

Government Debts and Financial Markets in Europe ◽

10.4324/9781315652825-14 ◽

2015 ◽

pp. 107-114

Keyword(s):

Financial Market ◽

Public Debt ◽

Long Run ◽

Kingdom Of Naples ◽

The Creation ◽

Debt Policies

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Distortionary tax and general equilibrium analysis of welfare maximized private and public goods consumption

Progressive Agriculture ◽

10.3329/pa.v29i2.38304 ◽

2018 ◽

Vol 29 (2) ◽

pp. 178-185

Author(s):

SMA Islam

Keyword(s):

General Equilibrium ◽

Public Goods ◽

Government Expenditure ◽

Equilibrium Analysis ◽

Economic Welfare ◽

Equal Weight ◽

Market Demand ◽

Consumption Tax ◽

Theoretical Assumption ◽

Long Run

There is a debate on economic efficiency and the improvement of economic welfare. In this research, I have fixed the value of rich and poor with equal weight with an assumption that the consumption tax is the source of government expenditure for public goods. This paper optimized improvement of equality and private consumption share of public goods with the prime revenue of consumption tax. This optimization process has also been analyzed in accordance with the theoretical assumption of Roy`s identity and Marshallian ordinary market demand function for justification of equity and welfare. Finally, this process compared implicitly to the process of Kuznets pattern economic development with taking assumption of distortionary consumption tax to penetrate the relationship between long term economic growth and economic welfare. The empirical evidence found in my earlier publication that consumption tax is welfare augmented in long run if the source of government expenditure is consumption tax to produce public goods. This welfare maximized general equilibrium evidences have potential opportunity of welfare augmented resource mobilization in a developing country where consumption tax is the source of prime revenue.Progressive Agriculture 29 (2): 178-185, 2018

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Financial Deepening

Arthaniti-Journal of Economic Theory and Practice ◽

10.1177/0976747918814031 ◽

2019 ◽

Vol 18 (2) ◽

pp. 111-137

Author(s):

Shankha Chakraborty

Keyword(s):

Financial Development ◽

Financial Market ◽

Capital Accumulation ◽

Agency Problems ◽

Financial Structure ◽

Financial Deepening ◽

External Finance ◽

Long Run ◽

Financial Contract ◽

Further Development

This article proposes a tractable model of the evolution of financial structure. Firms invest out of internal assets and by borrowing from banks and the financial market. In the presence of moral hazard, whereby owner–managers may intentionally reduce profitability of investment to appropriate resources, banks can monitor firms and partially alleviate agency problems. Under the optimal financial contract, banks monitor and outside investors lend to firms only if they borrow from banks too. The model is broadly consistent with financial development facts. Capital accumulation is facilitated by an increasing reliance on both types of external finance. Initially firms rely more heavily on expensive bank finance. With further development, banks eliminate much of the agency problem and firms substitute in favour of cheaper market finance. The short- and long-run effects of financial sector reforms are considered. JEL: E44, G20, O16

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Natural Limits of Wealth Inequality and the Effectiveness of Tax Policy

Public Finance Review ◽

10.1177/1091142117707970 ◽

2017 ◽

Vol 47 (1) ◽

pp. 32-57

Author(s):

Scott S. Condie ◽

Richard W. Evans ◽

Kerk L. Phillips

Keyword(s):

General Equilibrium ◽

Income Tax ◽

Wealth Inequality ◽

Wealth Accumulation ◽

Rates Of Return ◽

Unbalanced Growth ◽

Wealth Concentration ◽

Savings Rate ◽

Wealth Tax ◽

Growth Differences

This article examines Thomas Piketty’s thesis that there are no natural limits on the accumulation of wealth. We undertake our examination in the context of a simple general equilibrium model with infinitely lived dynasties. We show that extreme wealth accumulation does not happen in general equilibrium unless capital and labor are substitutes, an assumption which also leads to unbalanced growth. We also show that even with unbalanced growth, differences in rates of return and effective labor are not sufficient to cause unbounded inequality. Only permanent savings rate differences can lead to extreme wealth concentration. Finally, we show that while a flat wealth tax will not eliminate extreme wealth concentration, both a graduated wealth tax and a flat income tax will.

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