👍A Theory of the Saving Rate of the Rich

When I was working on my Pareto extrapolation paper with Émilien, an important ingredient was the asymptotic slopes of policy functions such as consumption functions. Although the asymptotic linearity of consumption functions with homothetic preferences was a folk theorem, nobody proved it rigorously or characterized the asymptotic slopes. So in November 2019, I wrote some preliminary notes, and asked John and Qingyin to work together as a follow up of Ma et al. (2020). John was busy and declined, so Qingyin and I worked on it.

Initially we had more theoretical results that assumed only the regular variation of the marginal utility, but I knew from past experience that this sort of technical papers are hard to publish, so we specialized to CRRA and added a detailed numerical application to make the paper more appealing to the general audience. The paper got rejected from ECMA but it was easy at JET.