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TRANSFERS TO THE POOR AND LONG RUN SAVINGS
Author(s) -
LAWRANCE EMILY C.
Publication year - 1987
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1987.tb00753.x
Subject(s) - economics , marginal propensity to consume , redistribution (election) , market liquidity , short run , time preference , redistribution of income and wealth , monetary economics , capital (architecture) , permanent income hypothesis , econometrics , microeconomics , labour economics , archaeology , public good , politics , law , political science , history
This paper examines the sensitivity of long run capital accumulation to income redistribution to the poor. I address this question using a simulation model composed of two classes of life cycle consumers, rich and poor, whose economic lives have fifty‐five periods. The poor hue a higher marginal propensity to consume than the rich because they possess a higher rate of time preference and for because they are liquidity constrained. Considering a wide range of parameter values, I find that lump sum, intergenerational redistribution from rich to poor causes minimal reduction in long run life cycle savings.