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Full-Text Articles in Macroeconomics
The Spirit Of Capitalism, Precautionary Savings, And Consumption, Yulei Luo, William Smith, Heng-Fu Zou
The Spirit Of Capitalism, Precautionary Savings, And Consumption, Yulei Luo, William Smith, Heng-Fu Zou
Yulei Luo
Recent research has shown that the “spirit of capitalism”—a preference for wealth itself, in addition to consumption—has important implications for growth and asset pricing. This paper explores how the spirit of capitalism affects saving and consumption behavior. We demonstrate that the spirit of capitalism may reduce the importance of precautionary savings. It can also explain the excess sensitivity puzzle: the spirit of capitalism causes dramatic deviations from a random walk. It may also offer a partial explanation of the excess smoothness puzzle.
The Wealth Distribution And The Demand For Status, Yulei Luo, Eric R. Young
The Wealth Distribution And The Demand For Status, Yulei Luo, Eric R. Young
Yulei Luo
Standard economic theories of asset markets assume that assets are valued entirely for the consumption streams they can finance. This paper examines the introduction of the demand for status (as a function of wealth) into a model of uninsurable idiosyncratic risk—the “spirit of capitalism” (“soc”) assumption. We find that soc preferences lead to less inequality in wealth; placing wealth into the utility function leads to a shrinking wealth distribution. The drop in wealth concentration is smaller if the utility function implies status is a luxury good, but no parametrization leads to higher wealth Gini coefficients than the benchmark case. We …