Zoomers and Boomers: Asset Prices and Intergenerational Inequality / Leland Farmer, Roger Farmer.

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Farmer, Leland

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30419.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We construct a perpetual youth DSGE model with aggregate un- certainty in which there are dynamically complete markets and agents have Epstein-Zin preferences. We prove that, when endowments have a realistic hump-shaped age-profile, our model has three steady-state equilibria. One of these equilibria is dynamically inefficient and displays real price indeterminacy. We estimate the parameters of our model and we find that a fourth-order approximation around the indeterminate steady-state provides the best fit to U.S. data. Our work interprets the large and persistent generational inequality that has been observed in western economies over the past century as the result of uninsurable income shocks to birth cohorts.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30419 (Browse shelf(Opens below))	Not For Loan

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September 2022.

We construct a perpetual youth DSGE model with aggregate un- certainty in which there are dynamically complete markets and agents have Epstein-Zin preferences. We prove that, when endowments have a realistic hump-shaped age-profile, our model has three steady-state equilibria. One of these equilibria is dynamically inefficient and displays real price indeterminacy. We estimate the parameters of our model and we find that a fourth-order approximation around the indeterminate steady-state provides the best fit to U.S. data. Our work interprets the large and persistent generational inequality that has been observed in western economies over the past century as the result of uninsurable income shocks to birth cohorts.