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dc.contributor.authorClemens, Christianeen_US
dc.contributor.authorHeinemann, Maiken_US
dc.date.accessioned2012-06-04en_US
dc.date.accessioned2012-06-08T13:57:25Z-
dc.date.available2012-06-08T13:57:25Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/58342-
dc.description.abstractThis paper combines the standard incomplete markets model of uninsurable idiosyncratic risks and borrowing constraints with the Arrow/Romer approach to endogenous growth to analyze the interaction of risk, growth, and inequality, the latter also endogenously determined in equilibrium. We derive conditions on existence and nonexistence of balanced growth paths. Major results include that growth, inequality, and risk are positively related in our model, but we also identify a hump-shaped relationship between welfare and risk, indicating a tradeoff relationship between risk-pooling and growth in the determination of welfare. We employ the prototypical policy implications of the underlying growth model (i.e. subsidizing capital returns) and find that the tax-transfer scheme positively affects growth while simultaneously reducing wealth inequality in the economy. The benefits and burdens of the underlying policy are unequally distributed, which raises the issue of politico-economic equilibria. We provide results on majority voting, finding that that the median voter prefers less than optimal subsidies on investment. Interestingly, the society might even vote against a policy providing full insurance against idiosyncratic risk, because welfare losses of lower growth more than offset welfare gains from lower risk.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo working paper: Fiscal Policy, Macroeconomics and Growth 3832en_US
dc.subject.jelO40en_US
dc.subject.jelD30en_US
dc.subject.jelD80en_US
dc.subject.jelD90en_US
dc.subject.jelC60en_US
dc.subject.ddc330en_US
dc.subject.keywordendogenous growthen_US
dc.subject.keywordwealth distributionen_US
dc.subject.keywordidiosyncratic risken_US
dc.subject.keywordborrowing constraintsen_US
dc.subject.keywordheterogeneous agentsen_US
dc.subject.keywordoptimal policyen_US
dc.subject.stwNeue Wachstumstheorieen_US
dc.subject.stwVermögensverteilungen_US
dc.subject.stwRisikoen_US
dc.subject.stwVerschuldungsrestriktionen_US
dc.subject.stwSozialpolitiken_US
dc.subject.stwMedian Voteren_US
dc.subject.stwWohlfahrtsanalyseen_US
dc.subject.stwTheorieen_US
dc.titleEndogenous growth, the distribution of wealth, and optimal policy under incomplete markets and idiosyncratic risken_US
dc.typeWorking Paperen_US
dc.identifier.ppn716984628en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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