Cripps, Martin, 1960- (1999) Capital market risk and the dynamics of the income distribution. Working Paper. University of Warwick. Centre for the Study of Globalisation and Regionalisation, Coventry.

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Abstract

This paper introduces a dynamic model of the wealth distribution with aggregate risk in the capital market; the model combines credit rationing and portfolio selection decisions. In a closed economy the long-run behaviour of wealth is independent of the initial income distribution when there is aggregate uncertainty, although further restrictions are necessary when there is no aggregate uncertainty. There can be credit rationing at the long-run equilibrium. In poor economies aggregate risk in the capital market slows growth, whereas in richer economies a risky capital market is good for income growth.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Centre for the Study of Globalisation and Regionalisation
Library of Congress Subject Headings (LCSH):	Capital market -- Mathematical models, Risk management, Distribution (Economic theory), Uncertainty -- Mathematical models
Series Name:	Working papers (University of Warwick. Centre for the Study of Globalisation and Regionalisation)
Publisher:	University of Warwick. Centre for the Study of Globalisation and Regionalisation
Place of Publication:	Coventry
Date:	May 1999
Number:	No.33/
Number of Pages:	38
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
URI:	http://wrap.warwick.ac.uk/id/eprint/2092

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