Citation

Discussion Paper Details

Please find the details for DP6750 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Capital Markets, Information Aggregation and Inequality: Theory and Experimental Evidence

Author(s): Hans Peter Grüner

Publication Date: March 2008

Keyword(s): capital markets, Consumption driven investment, information aggregation and wealth distribution

Programme Area(s): Financial Economics and Public Economics

Abstract: In most industrialized economies, financial wealth is distributed far more unequally than income. According to Wolff (2007) more than half of the American households possess almost no productive capital while realizing about 20 percent of national income. This mismatch poses a problem for the efficient aggregation of consumer needs on capital markets. Individuals use information about their own preferences as consumers to identify profitable investments. Under certain conditions, this behaviour efficiently matches future demand with productive capacity, thus replacing future markets for consumer goods. However, when wealth is distributed too unequally, capacity cannot match consumer needs. I present some first experimental evidence in favour of consumption driven investment behaviour based on real portfolio choices and self-reported preferences about consumer goods.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6750

Bibliographic Reference

Grüner, H. 2008. 'Capital Markets, Information Aggregation and Inequality: Theory and Experimental Evidence'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6750