A Q-Theory of Inequality

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Abstract/Contents

Abstract: We study the effect of interest rates on top wealth inequality. While lower rates decrease the average growth rate of existing fortunes, they increase the growth rate of new fortunes by making it cheaper to raise capital. We develop a sufficient statistic approach to express the effect of interest rates on the Pareto exponent of the wealth distribution: it depends on the average equity issuance and leverage of individuals reaching the top. Quantitatively, we find that the secular decline in real interest rates has been a major contributor to the rise in top wealth inequality in the U.S.

Type of resource	text
Form	online resource
Extent	1 online resource
Place	Stanford (Calif.)
Publisher	Stanford Institute for Theoretical Economics
Publication date	2020
Language	English
Digital origin	born digital

Genre	Conference papers and proceedings

Note	Presented at SITE on July 17, 2020
Session series	Title Asset Pricing, Macro Finance, and Computation
Session	Organizer of meeting Judd, Kenneth Pohl, Walter Schmedders, Karl Wilms, Ole Abstract This session focuses on recent advances in asset pricing and macro finance as well as the use of computational techniques in these areas. Possible topics include but are not limited to the following: investor heterogeneity, learning and ambiguity, new preference structures for pricing models, or using machine learning to understand the cross-section of returns. As the analysis of such models often requires the use of computational methods, we encourage submissions that develop and make use of new numerical techniques.
Location	https://purl.stanford.edu/mb286yj5502
Repository	Stanford Institute for Theoretical Economics

Use and reproduction: This publication is open for research use. Copyright is retained by the author(s) or their heir(s).

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