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

Format:

Book

Author/Creator:

Farmer, Leland.

Contributor:

National Bureau of Economic Research.

Farmer, Roger.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30419.

NBER working paper series no. w30419

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We construct a perpetual youth DSGE model with aggregate uncertainty 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.

Notes:

Print version record

September 2022.