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The Journal of political economy, 2017-04, Vol.125 (2), p.431-477
Ort / Verlag
United States: University of Chicago Press
Erscheinungsjahr
2017
Quelle
EBSCOhost Business Source Ultimate
Beschreibungen/Notizen
We show that financial knowledge is a key determinant of wealth inequality in a stochastic life cycle model with endogenous financial knowledge accumulation, where financial knowledge enables individuals to better allocate lifetime resources in a world of uncertainty and imperfect insurance. Moreover, because of how the US social insurance system works, better-educated individuals have most to gain from investing in financial knowledge. Our parsimonious specification generates substantial wealth inequality relative to a one-asset saving model and one in which returns on wealth depend on portfolio composition alone. We estimate that 30–40 percent of retirement wealth inequality is accounted for by financial knowledge.