Tesis
The portfolio choice channel of wealth inequality
Fecha
2021Autor
Rosso, Lucas
Institución
Resumen
This paper studies how di erences in portfolio choice between households help explain the
highly unequal wealth distribution seen in the data. It has been well documented that participation
rates are substantially smaller than the ones predicted in standard models of portfolio
choice. Also, both participation rates and risky shares are highly increasing in wealth. However,
both features are usually absent in workhorse models of wealth accumulation. I introduce
portfolio choice and adjustment frictions into an otherwise standard model of households saving
behavior. Calibrating it to U.S. household-level data, I show that the model is able to
provide a better t of the wealth distribution, while being consistent with well-known facts
of households' portfolio choices. In particular, the model explains roughly half of the gap
between top wealth shares predicted by traditional models of wealth accumulation (e.g. Aiyagari,
1994) and the data.