Interpreting Life-Cycle Inequality Patterns as an Efficient Allocation: Mission Impossible?
Federal Reserve Bank of St. Louis Working Paper No. 2010-046C
35 Pages Posted: 30 Oct 2010 Last revised: 24 Jul 2014
Date Written: February 1, 2014
Abstract
The life-cycle patterns of consumption, wage and hours inequality observed in U.S. cross-section data are commonly viewed as incompatible with a Pareto efficient allocation. We determine the extent to which these qualitative and quantitative patterns can or cannot be produced by Pareto efficient allocations in models with preference shocks, wage shocks and full information.
Keywords: Life Cycle, Inequality, Efficient Allocation, Preference Shocks
JEL Classification: E21, D91, D52
Suggested Citation: Suggested Citation
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