TY  - JOUR
A1  - Clemens, Christiane
A1  - Heinemann, Maik
T1  - Endogenous growth and wealth inequality under incomplete markets and idiosyncratic risk
JF  - Journal of macroeconomics
N2  - This paper describes the equilibrium properties and dynamics of a model which combines the key features of the standard incomplete market model (Aiyagari, 1994) with a standard endogenous growth mechanism to gain a deeper understanding of the feedback effects between growth and wealth inequality in the presence of credit frictions and idiosyncratic risk. We characterize growth equilibria and find that a balanced growth path not necessarily exists if households are subject to ad hoc borrowing constraints. 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. The growth rate responds to changes in the wealth distribution and displays transitional dynamics towards the balanced growth path. (C) 2015 Elsevier Inc. All rights reserved.
KW  - Endogenous growth
KW  - Borrowing constraints
KW  - Wealth distribution
KW  - Idiosyncratic risk
KW  - Heterogeneous agents
Y1  - 2015
U6  - https://doi.org/10.1016/j.jmacro.2015.05.008
SN  - 0164-0704
SN  - 1873-152X
VL  - 45
SP  - 300
EP  - 317
PB  - Elsevier
CY  - Amsterdam
ER  -