Wealth inequality in a Heterogeneous-Agent Stock-Flow Consistent Model - PEGFA seminar

Greenwich Campus

Venue: Queen Anne Court, QA139

In the regular seminar series from the Centre of Political Economy, Governance, Finance and Accountability (PEGFA), current research papers are presented and discussed. The programme covers contemporary issues in political economy, macroeconomics, inequality, taxation, sustainability, public policy and economic development, and more.

This seminar will be split into two sessions. In the first slot, we will hear the paper described in the abstract below.

More details of the second talk and other PEGFA seminars

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PEGFA Slot 1

Rafael Wildauer

Topic: Wealth inequality in a Heterogeneous-Agent Stock-Flow Consistent Model

This paper develops a stock-flow consistent (SFC) macroeconomic model with heterogeneous households to investigate the structural drivers of wealth inequality. Standard life-cycle models struggle to replicate real-world wealth distributions, which are far more skewed than income distributions and highly concentrated at the top, even when extended with features like precautionary saving or bequest behaviour.

We argue that SFC models offer a better framework because they use ecologically rational, heuristic-based agents rather than utility-maximising ones, enabling richer household balance sheets with multiple assets. Most existing SFC models are too aggregated to generate meaningful wealth distributions, so the paper constructs a disaggregated version with idiosyncratic income shocks and institutional differences between asset classes.

Four inequality-generating mechanisms are examined: heterogeneous saving propensities by wealth level; class-based access to higher-returning private business equity; wealth-dependent risk aversion affecting portfolio choice; and differential borrowing costs from collateral constraints. In addition we use the model to evaluate the distributional and macroeconomic effect of various income and capital taxation interventions.

The model is calibrated to UK household data to assess each mechanism's quantitative contribution to observed wealth concentration. A central question is how much of the extreme upper tail is explained by institutional factors, particularly who can access private business ownership, rather than purely behavioural differences. The paper bridges SFC macroeconomics and heterogeneous-agent modelling to illuminate the institutional roots of wealth accumulation.

Co-authored by Karsten Kohler

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This is an in-person seminar, with an option for online attendance via Teams – though in-person attendance is encouraged for the best experience.

Teams (Online) details:
Meeting ID: 319 421 430 872 5
Passcode: N9eW6W66
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