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dc.contributor.authorSun, Gang
dc.identifier.citationSun , G 2013 ' Consumption inequality and discount rate heterogeneity ' School of Economics & Finance Discussion Paper , no. 1318 , University of St Andrews .en
dc.identifier.otherPURE: 104377776
dc.identifier.otherPURE UUID: 9e7e1448-3b8a-49d1-bf60-21ba51de4815
dc.description.abstractAlthough standard incomplete market models can account for the magnitude of the rise in consumption inequality over the life cycle, they generate unrealistically concave age profiles of consumption inequality and unrealistically less wealth inequality. In this paper, I investigate the role of discount rate heterogeneity on consumption inequality in the context of incomplete market life cycle models. The distribution of discount rates is estimated using moments from the wealth distribution. I find that the model with heterogeneous income profiles (HIP) and discount rate heterogeneity can successfully account for the empirical age profile of consumption inequality, both in its magnitude and in its non-concave shape. Generating realistic wealth inequality, this simulated model also highlights the importance of ex ante heterogeneities as main sources of life time inequality.
dc.publisherUniversity of St Andrews
dc.relation.ispartofseriesSchool of Economics & Finance Discussion Paperen
dc.rights(c) the author 2013en
dc.subjectconsumption inequalityen
dc.subjectdiscount rate heterogeneityen
dc.subjectlife cycleen
dc.subjectrisk sharingen
dc.subjectincomplete marketen
dc.subjectHB Economic Theoryen
dc.titleConsumption inequality and discount rate heterogeneityen
dc.typeWorking or discussion paperen
dc.contributor.institutionUniversity of St Andrews.School of Economics and Financeen

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