Bilbiie, F O, Känzig, D R and Surico, P (2021) Capital and Income Inequality: an Aggregate-Demand Complementarity. Working Paper. Working Paper. (Unpublished)
Abstract
A novel complementarity between capital and income inequality leads to a significant amplification of the effects of aggregate-demand shocks on consumption. We characterize this finding using a simple model with heterogeneity in household saving and income, nominal rigidities, and capital. A fiscal policy that redistributes capital income causes further amplification, whereas redistributing profits generates dampening. After an interest rate shock, consumption inequality is more countercyclical than income inequality, consistent with the available empirical evidence.
More Details
Item Type: | Monograph (Working Paper) |
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Subject Areas: | Economics |
Additional Information: |
Surico gratefully acknowledges financial support from the European Research Council (Consolidator Grant 771976) |
Funder Name: | European Research Council |
Date Deposited: | 10 Sep 2021 13:25 |
Last Modified: | 18 Sep 2024 10:59 |
URI: | https://lbsresearch.london.edu/id/eprint/1953 |