Contractual structure and wealth accumulation

Dilip Mookherjee, Debraj Ray

    Research output: Contribution to journalArticle

    Abstract

    Can historical wealth distributions affect long-run output and inequality despite "rational" saving, convex technology and no externalities? We consider a model of equilibrium short-period financial contracts, where poor agents face credit constraints owing to moral hazard and limited liability. If agents have no bargaining power, poor agents have no incentive to save: poverty traps emerge and agents are polarized into two classes, with no interclass mobility. If instead agents have all the bargaining power, strong saving incentives are generated: the wealth of poor and rich agents alike drift upward indefinitely and "history" does not matter eventually. (D31, D91, 132, O17, Q15).

    Original languageEnglish (US)
    Pages (from-to)818-849
    Number of pages32
    JournalAmerican Economic Review
    Volume92
    Issue number4
    DOIs
    StatePublished - Sep 2002

    Fingerprint

    Wealth accumulation
    Bargaining power
    Incentives
    Limited liability
    Moral hazard
    Financial contracts
    Credit constraints
    Wealth
    Externalities
    Wealth distribution
    Poverty trap

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Contractual structure and wealth accumulation. / Mookherjee, Dilip; Ray, Debraj.

    In: American Economic Review, Vol. 92, No. 4, 09.2002, p. 818-849.

    Research output: Contribution to journalArticle

    Mookherjee, Dilip ; Ray, Debraj. / Contractual structure and wealth accumulation. In: American Economic Review. 2002 ; Vol. 92, No. 4. pp. 818-849.
    @article{626ad4906bef4b7ba2a9decc697ca461,
    title = "Contractual structure and wealth accumulation",
    abstract = "Can historical wealth distributions affect long-run output and inequality despite {"}rational{"} saving, convex technology and no externalities? We consider a model of equilibrium short-period financial contracts, where poor agents face credit constraints owing to moral hazard and limited liability. If agents have no bargaining power, poor agents have no incentive to save: poverty traps emerge and agents are polarized into two classes, with no interclass mobility. If instead agents have all the bargaining power, strong saving incentives are generated: the wealth of poor and rich agents alike drift upward indefinitely and {"}history{"} does not matter eventually. (D31, D91, 132, O17, Q15).",
    author = "Dilip Mookherjee and Debraj Ray",
    year = "2002",
    month = "9",
    doi = "10.1257/00028280260344489",
    language = "English (US)",
    volume = "92",
    pages = "818--849",
    journal = "American Economic Review",
    issn = "0002-8282",
    publisher = "American Economic Association",
    number = "4",

    }

    TY - JOUR

    T1 - Contractual structure and wealth accumulation

    AU - Mookherjee, Dilip

    AU - Ray, Debraj

    PY - 2002/9

    Y1 - 2002/9

    N2 - Can historical wealth distributions affect long-run output and inequality despite "rational" saving, convex technology and no externalities? We consider a model of equilibrium short-period financial contracts, where poor agents face credit constraints owing to moral hazard and limited liability. If agents have no bargaining power, poor agents have no incentive to save: poverty traps emerge and agents are polarized into two classes, with no interclass mobility. If instead agents have all the bargaining power, strong saving incentives are generated: the wealth of poor and rich agents alike drift upward indefinitely and "history" does not matter eventually. (D31, D91, 132, O17, Q15).

    AB - Can historical wealth distributions affect long-run output and inequality despite "rational" saving, convex technology and no externalities? We consider a model of equilibrium short-period financial contracts, where poor agents face credit constraints owing to moral hazard and limited liability. If agents have no bargaining power, poor agents have no incentive to save: poverty traps emerge and agents are polarized into two classes, with no interclass mobility. If instead agents have all the bargaining power, strong saving incentives are generated: the wealth of poor and rich agents alike drift upward indefinitely and "history" does not matter eventually. (D31, D91, 132, O17, Q15).

    UR - http://www.scopus.com/inward/record.url?scp=0038398282&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=0038398282&partnerID=8YFLogxK

    U2 - 10.1257/00028280260344489

    DO - 10.1257/00028280260344489

    M3 - Article

    AN - SCOPUS:0038398282

    VL - 92

    SP - 818

    EP - 849

    JO - American Economic Review

    JF - American Economic Review

    SN - 0002-8282

    IS - 4

    ER -