2022/30 | LEM Working Paper Series | ||||||||||||||||
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Heterogeneity in Macroeconomics: The Compositional Inequality Perspective |
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Marco Ranaldi and Elisa Palagi |
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Heterogeneity in Macroeconomics; Compositional Inequality.
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JEL Classifications | |||||||||||||||||
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D31, P10, O43
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Abstract | |||||||||||||||||
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This work presents a framework to jointly study individuals' heterogeneity
in terms of their capital and labor endowments (endowment heterogeneity) and of
their saving and consumption behaviors (behavioral heterogeneity), from an empirical
perspective. By adopting a newly developed synthetic measure of compositional inequality, this work classifies more than 20 economies across over two
decades on the basis of their heterogeneity characteristics. Modern economies are
far from being characterized by agents with same propensities to save and con-
sume and same endowments (Representative Agent systems), or by the existence
of rich capital-abundant savers and poor hand-to-mouth consumers (Kaldorian
systems). Our framework and results are discussed in light of the heterogeneity
assumptions underlying several types of macroeconomic models with heterogeneous
agents (Kaldorian, TANK & HANK, OLG, and ABM models). A negative
relationship between behavioral heterogeneity and the economy's saving rate is
also documented.
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