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A representative consumer theory of distribution

By Francesco Caselli and Jaume Ventura

Abstract

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

Topics: HB Economic Theory
Publisher: American Economic Association
Year: 2000
DOI identifier: 10.1257/aer.90.4.909
OAI identifier: oai:eprints.lse.ac.uk:3916
Provided by: LSE Research Online
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