The dynamics of Pareto distributed wealth in a small open economy
研究小型开放经济中财富分布如何收敛到帕累托分布，并解释政府税收政策如何影响经济增长率与风险厌恶之间的非单调关系。
Abstract We study a small open economy with labor, capital accumulation, random death, taxation and a government budget balanced in the long run. We offer methods that provide ordinary differential equations for means and analytical expressions for densities. The latter is achieved by solving stochastic differential equations analytically and deriving the density from this solution. Starting from any distribution, the aggregate distribution converges, both on a transition path towards a steady state and on a transition path towards balanced growth, to a Pareto-distribution. We provide an intuitive economic interpretation for a stationary long-run density with an infinite mean in an economy on a balanced growth path. We also show how government tax policy can lead to non-monotonic links between the equilibrium growth rate of the economy and risk aversion of households.