Key points are not available for this paper at this time.
Analysing the sensitivity of the income and wealth distribution to changes in asset returns is of particular importance in the current environment of high inflation and low growth. In this paper, I calibrate a two-asset heterogeneous agent model with uninsurable idiosyncratic income risk but no aggerate uncertainty to the UK income and wealth distribution to evaluate the effect of changes in the liquidity premium and transaction costs on the joint distribution. I accomplish this using data on household balance sheets from the Office for National Statistics' Wealth and Assets Survey (WAS). My contribution to the literature on distribution-realistic partial equilibrium models may be useful in informing the debate on the effect of wealth, and changes in its distribution, on consumption-saving behaviour in the UK.
Adam Butlin (Tue,) studied this question.