Please use this identifier to cite or link to this item:
|Title:||Why do the Rich Save More? A Theory and Australian Evidence|
|Publisher:||Department of Economics|
|Abstract:||We provide a theory to explain the existence of inequality in an economy where agents have identical preferences and have access to the same production technology. Agents consume a “utility” good and a “health” good which determines their subjective discount factor. Depending on initial distribution of capital the economy gets separated into different permanent-income groups. This leads to a testable hypothesis: “The rich save a larger proportion of their permanent income”. We test this implication for the savings behaviour in Australia. We show that even after controlling for life-cycle characteristics permanent income and savings are positively correlated. An improvement in the health leads to a positive effect on savings behaviour.|
|ISBN:||1 86487 843 6|
|Type of Work:||Working Paper|
|Appears in Collections:||Working Papers - Economics|
This work is protected by Copyright. All rights reserved. Access to this work is provided for the purposes of personal research and study. Except where permitted under the Copyright Act 1968, this work must not be copied or communicated to others without the express permission of the copyright owner. Use the persistent URI in this record to enable others to access this work.
|ECON 2006-2.1.pdf||308.89 kB||Adobe PDF||View/Open|
Items in Sydney eScholarship Repository are protected by copyright, with all rights reserved, unless otherwise indicated.