Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235428 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9058
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We study a small open economy displaying Pareto-distributed wealth resulting from random death. The government runs a distribution scheme on inheritance. We present the mathematical background that allows to study the dynamics of means. We end up with ordinary differential equations for the mean of age and of individual and government wealth. We also study distributional dynamics analytically. Starting from any distribution of age and wealth, the aggregate distribution converges, both on a transition path towards a steady state and on a transition path towards balanced growth, to an exponential distribution of age and a Pareto-distribution of wealth. The findings are illustrated for different distribution schemes.
Subjects: 
analytical dynamics of mean and distribution
age and wealth
government budget
stochastic differential equation
Kolmogorov backward equation
JEL: 
C61
D31
E21
Document Type: 
Working Paper
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