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Income distribution by age group and productive bubbles
1 : Departament de Teoria Economica and CREB, Universitat de Barcelona
2 : Seegmuller
CNRS GREQAM
3 : Groupement de Recherche en Économie Quantitative d'Aix-Marseille
(GREQAM)
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Website
Université de la Méditerranée - Aix-Marseille II, Université Paul Cézanne - Aix-Marseille III, École des Hautes Études en Sciences Sociales [EHESS], CNRS : UMR7316, Ecole des Hautes Etudes en Sciences Sociales (EHESS)
Centre de la Charité, 2 rue de la Charité, 13236 Marseille cedex 02 -
France
We study a three period OG model where productive investment done in the first period of life is a long term investment whose return occurs in the following two periods. A bubble is a short term speculative investment that facilitates intertemporal consumption smoothing. We show that the distribution of income by age group determines both the existence of bubbles and the effect of bubbles on aggregate production. We also show that fiscal policy, by changing the distribution of income, may prevent the existence of bubbles and it may modify the effect that bubbles have on aggregate production.
