Mark Trede (University of Münster) on "Whoever has will be given more: Are earnings subject to a self-reinforcing mechanism?"

Speaker:  Mark trede - University of Münster
  Wednesday, May 6, 2015 at 12:30 PM Aula Menegazzi, Palazzo di Economia
This paper suggests a model of explosive earnings dynamics
where positive deviations tend to increase the growth rate
even further. This ``Matthew effect'' can explain a number
of empirical regularities. First, we show that the explosive model
might resemble a model with heterogeneous earnings profiles
in terms of the covariance structure. Second, we derive
the optimal consumption and savings behaviour under
explosiveness and compare it to other models. Third, we
present a panel test against explosiveness and apply it
to German and U.S.\ earnings data. We find that the null
hypothesis of no explosiveness can be rejected. However,
the proportion of explosive profiles is small.

Programme Director
Eugenio Peluso

External reference
Luigi Grossi

Publication date
January 13, 2015