the effects of fiscal policies when incomes are uncertain a contradiction to ricardian equivalence this paper shows that when future earnings are uncertain the substitution of deficit fin ance for tax finance or the introduction of an unfunded social secur ity program can raise consumption even if all bequests reflect inter generational altruism an operative bequest motive therefore need not imply ricardian equivalence this conclusion follows from the result derived in the paper that the uncertainty of future income makes t he existence of a future bequest uncertain to the prospective donor copyright 1988 by american economic association

corporate social responsibility failures how do consumers respond to corporate violations of implied social contracts this research documents consumers potential to monitor corporations license to operate through their consumption responses to corporate social responsibility failures the premise is that the type of social contracts or standards in place may determine how consumers through their individual and collective behaviors can play a direct role in influencing corporate behavior when corporations fail to meet social responsibility standards an experiment conducted with a large sample of consumers in the united states shows that consumers respond differently to a company s failure in its social responsibilities depending on whether the violated standard is a government mandate or a voluntary commitment and depending on the consumers own environmental consciousness the findings highlight the potential power of individual consumers and consumer collectives in narrowing the governance gaps relative to social and environmental issues and reducing the likelihood of csr failures

has work sharing worked in germany industry by industry basis in an attempt to raise employment whether this work sharing works is theoretically ambiguous i exploit the cross industry variation in standard hours reductions to examine their impact on actual hours worked wages and employment analysis of industry level data suggests that work sharing may have reduced employment in the period 1984 1994 using individual data from the german socio economic panel i substantiate the union claim of full wage compensation the hourly wage rose enough to offset the decline in actual hours worked

csr in stakeholde expectations and their implication for company strategy recent years have seen dramatic changes in the attitudes and expectations brought to bear on companies over ten years of research at mori has shown the increasing prominence of corporate responsibility for a wide range of stakeholders from consumers and employees to legislators and investors

the effect of social security on the steady state distribution of consumption abstract abel has shown that the introduction of a fully funded social security ss would decrease the variances of the steady state distribution of young period and old period consumptions eckstein et al have shown that a perfect ss would increase the steady state expected utility of consumptions we intend to give a caveat on their positive results by showing that the assumptions from which the above propositions are derived have some unrealistic implications and that by replacing these assumptions with more reasonable ones we may obtain very different results the only positive conclusion we are certain of is that a marginal ss insurance in the no insurance situation can always reduce the steady state coefficient of variation of both young and old period consumption distributions

the distribution of wealth with imperfect altruism abstract in this paper we study the distribution of wealth in an economy with infinitely lived families individual generations of each family may or may not be altruistic this is represented as a preference shock which follows a first order markov process within each family a feature representingimperfect altruism altruistic individuals care about the welfare of their children and are likely to leave bequests selfish ones do not this results in a non trivial distribution of wealth among families at any point in time we study an economy with a risk free linear production technology and show that a stationary distribution of wealth exists this distribution is discrete and approximates the pareto distribution under additional restrictions we also characterize conditions on the production technology which yields perpetual growth with increasing inequality journal of economic literatureclassification numbers d31 d91 e21

distributional effects of public education in an economy with public pensions we study how the allocation of government expenditures between two major outlays education and pay as you go social security affects human capital distribution in an economy with heterogeneous agents we consider an overlapping generations economy where the government maintains both programs and allocates tax revenues to finance them in our model human capital is one of the factors of production it is itself produced as a combined result of public inputs and private inputs parents decisions to invest time and material resources in education of their children are motivated by altruism heterogeneous in its strength across the population which leads to heterogeneity of incomes we investigate the effect of an increase in public funding for education on the human capital distribution we show that in this framework contrary to some earlier results increased spending on public education may lead to higher inequality our results depend crucially on the interaction of education funding with the social security budget and on the elasticity of substitution in the learning technology

pride and prejudice using ethnic sounding names and inter ethnic marriages to identify labour market discrimination labour markets discriminate against workers with particular ethnic sounding names we use non random sorting into interethnic marriage and salient differences between sephardic and ashkenazi surnames to evaluate the causal impact of sephardic affiliation on wages using the 1995 israeli census we estimate the effect of a sephardic sounding surname on wages we first compare the wages of israeli jewish males born to sephardic fathers and ashkenazi mothers sa who are more likely to carry a sephardic surname with the wages of israeli jewish males born to ashkenazi fathers and sephardic mothers as we find that israeli labor markets discriminate based on perceived ethnicity sa workers earn significantly less than their as counterparts we then exploit the custom of women to adopt their husbands surnames to disentangle actual ethnicity from the ethnicity perceived by the market consistent with ethnic discrimination based on surnames we find that it is father in law s ethnicity rather than father s ethnicity that shapes female wage rates finally we find that labor markets discriminate based on surname only when those names provide additional information about ethnicity when ethnicity can be discerned from skin tone surnames do not provide additional explanatory power with respect to wages

comment on kotlikoff shoven and spivak in the absence of perfect annuity markets individual consumers generally undertake precautionary saving to provide resources for their future consumption in the event that they live longer than expected kotlikoff shoven and spivak in this issue hereafter kss have provided us with a well conceived and well executed study of the effects of various annuity arrangements on individual and aggregate saving in the presence of lifetime uncertainty each of these authors has had a long standing interest in this area and their current paper reflects their accumulated expertise their results indicate that a potentially sizable fraction of u s household wealth represents precautionary saving resulting from the absence of perfect annuity markets the strategy of the kss paper is to develop simple models of individual saving behavior on the basis of utility maximization and then to aggregate the behavior of individuals both intraand intertemporally by comparing the results of models that differ in the specification of bequest motives and opportunities for creating annuities kss provide insights about the effects of various annuity arrangements on saving and capital accumulation although the models are all conceptually simple analytic solutions cannot be obtained in many cases therefore kss provide numerical solutions to their models in addition because the models are conceptually

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

when equal opportunity is not enough training costs and intergenerational inequality this paper develops an individual optimization model with persistent intergenerational immobility its key feature is that training costs are negatively correlated with family background leading to differences in privately optimal training levels across population groups heterogeneity of innate abilities is shown to reduce but not eliminate the importance of family backgrounds conversely wage thresholds which result from indivisibilities in the production or training functions or noncompetitive elements in the economy such as segmented labor markets increase the scope for inequality in the steady state

new evidence on the ricardian equivalence theorem a multicointegration approach this paper derives major theoretical constructs which underlie richardian equivalence and using multicointegration methodology empirically tests whether they bear out results indicate that government spending and revenues are cointegrated however the cointegrating scalar is less than one therefore in order for government to obey its intertemporal budget constraint debt and government revenue must be multicointegrated they are not additional evidence indicates that saving and debt may be weakly cointegrated the findings suggest that failure of richardian equivalence may be due to public rather than private sector failure

the 35 hour workweek in france straightjacket or welfare improvement workweek reduction laws may be beneficial if market interactions do not fully take into account the preferences reflected in declining secular trends in working hours the most recent law in france shortened the workweek from 39 to 35 hours in 2000 for large firms and in 2002 for small firms analysing differences between large and small firm employees before and after the law we find that aggregate employment was unaffected but labour turnover increased as firms shed workers who became more expensive survey responses indicate that the welfare impact of the law was different across groups of workers women but not men may have benefited from coordination to a shorter workweek and there is also evidence of negative welfare effects for managers possibly due to the law s administrative burden marcello estevao and filipa sa

eco labeled products trend or tools for sustainability strategies the paper offers a point of view on credibility of eco labeled products analyzing the relationships among company s sustainable strategy eco label and no financial reports based on a cross sector study of 109 companies with the eu eco label licenses in italy the paper points out different behaviors among the companies investigated and explains the leadership of italy in the number of these licenses however the paper underlines that the use of sustainability tools is not always matched to the explanation of companies sustainable strategies the study identifies the significant drivers for the management of eco label within a sustainability strategy drawing attention to the weight and the hierarchical level of different decisions about sustainability this study contributes to strengthening the understanding promoting a discussion on the use of eco label and on its value and describing a desirable behavior that any company should tend in order to nourish the credibility that is an essential aspect for building strong associations with the brand

capital accumulation and annuities in an adverse selection economy this paper suggests that adverse selection problems in competitive annuity markets can generate quantity constrained equilibria in which some agents whose length of lifetime is uncertain find it advantageous to accumulate capital privately this occurs despite the higher rates of return on annuities the welfare properties of these allocations are analyzed it is shown that the level of capital accumulation is excessive in a paretian sense policies that eliminate this inefficiency are discussed copyright 1987 by university of chicago press

distribution and growth in models of imperfect capital markets abstract a full analysis of the distribution of income should include both the inequality in income between different generations of the same family what is usually called intergenerational ocial mobility and the inequality in income between different families in the same generation becker tomes 1979 p 1154

estate taxation with intended and accidental bequests abstract in this paper we examine the properties of the optimal estate tax in the presence of a complete set of tax instruments available to the social planner we allow for both types of bequest motives namely altruistic and accidental we examine the case for estate taxation which seems to be the strongest but not impeccable with accidental bequests in general the estate tax is highly sensitive to the relative importance of the two bequest motives

ecology driven real options an investment framework for incorporating uncertainties in the context of the natural environment the role of uncertainty within an organization s environment features prominently in the business ethics and management literature but how corporate investment decisions should proceed in the face of uncertainties relating to the natural environment is less discussed from the perspective of ecological economics the salience of ecology induced issues challenges management to address new types of uncertainties these pertain to constraints within the natural environment as well as to institutional action aimed at conserving the natural environment we derive six areas of ecology induced uncertainties and propose ecology driven real options as a conceptual approach for systematically incorporating these uncertainties into strategic management we combine our results in an integrative investment framework and illustrate its application with the case of carbon constraints

uncertainty and optimal social security systems this paper examines the annuity aspect of social security within the framework of an overlapping generations model the duration of life is assumed to be uncertain under a fully funded system demand for social security is determined by each generation so as to maximize expected lifetime utility taking into account the welfare of future generations under a pay as you go system with intergenerational transfers demand for retirement benefits by the working population takes into account taxes paid by descendants it is shown that the two modes of finance are equivalent in terms of all real aggregates effects of changes in expected lifetime and in the birth rate are analyzed starting at the optimal level a compulsory balanced increase in social security taxes and benefits is shown to increase short run savings

a theory of intergenerational mobility we study the link between market forces cross sectional inequality and intergenerational mobility emphasizing complementarities in the production of human capital we show that wealthy parents i

can an industry be socially responsible if its products harm consumers the case of online gambling online gambling companies claim that they are ethical providers they seem committed to corporate social responsibility csr practices that are aimed at preventing or minimising the harm associated with their activities our empirical research employed a sample of 209 university student online gamblers who took part in an online survey our findings suggest that the extent of online problem gambling is substantial and that it adversely impacts on the gambler s mental and physical health social relationships and academic performance online problem gambling seems to be related to the time spent on the internet and gambling online parental peer gambling and binge drinking as our findings show that there are harmful repercussions associated with online gambling we argue that companies in this controversial sector cannot reach the higher level of csr achieved by other industries nevertheless they can gain legitimacy on the basis of their csr engagement at a transactional level and so by meeting their legal and ethical commitments and behaving with transparency and fairness the integrity of the company can be ensured we also argue that current failures in the implementation and control of csr policies the reliance on revenue from problem gamblers losses and controversial marketing activities appear to constitute the main obstacles in the prevention or minimisation of harm related to online gambling as online gambling companies must be responsible for the harm related to their activities we suggest that csr policies should be fully implemented monitored and clearly reported all forms of advertising should be reduced substantially and unfair or misleading promotional techniques should be banned the industry should not rely on revenue from problem gamblers nor should their behaviour be reinforced by marketing activities i e rewards we realise however that it is unrealistic to expect the online gambling industry to prioritise harm prevention over revenue maximisation policy makers and regulators therefore would need to become involved if the actions suggested above are to be undertaken csr is paramount to minimise harm and provide a healthier user experience in this business sector but it also poses marketing dilemmas we support a global collaborative approach for the online gambling industry as harm related to gambling is a public health issue

using alsace moselle local laws to build a difference in differences estimation strategy of the employment effects of the 35 hour workweek regulation in france france s 1998 implementation of the 35 hour workweek has been one of the greatest regulatory shocks on labor markets few studies evaluate the impact of this regulation because of a lack of identification strategies for historical reasons due to the way alsace moselle was returned to france in 1918 the implementation of france s 35 hour workweek was less stringent in that region than in the rest of the country which is confirmed by double and triple differences yet it shows no significant difference in employment with the rest of france which casts doubt on the effectiveness of this regulation

the distribution of wealth and welfare in the presence of incomplete annuity markets this paper examines the implications of the absence of complete annuity markets on the distribution of wealth and welfare of agents whose saving decisions are obtained under uncertainty regarding the length of their life the absence of annuities is shown to yield a unique nondegenerate intragenerational distribution of wealth which is fully characterized this characterization is then used to evaluate the pareto desirability of an annuity system alternative welfare criteria that can be used when the proposed change has differential impacts on the initial state of subsequent generations are considered

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

capital accumulation and uncertain lifetimes with adverse selection this paper examines the implications of adverse selection in the private annuity market for the pricing of private annuities and the consequent effects on constrption and bequest behavior with privately known heterogeneous mortality probabilities adverse selection causes the rate of return on private annuities to be less than the actuarially fair rate based on population average mortality however a fully funded social security system with compulsory participation can offer an implied rate of return equal to the actuarially fair rate based on population average mortality thus since social security offers a higher rate of return than private annuities consumers cannot completely offset the effects of social security by transacting in the private annuity market using an overlapping generations model with uncertain lifetimes we demonstrate that the introduction of actuarially fair social security reduces the steady state rate of return on annuities and raises the steady state levels of average bequests and average consumption of the young the steady state national capital stock rises or falls according to the strength of the bequest motive this abstract was borrowed from another version of this item

uncertain lifetimes and the welfare enhancing properties of annuity markets and social security this paper explores the implications of social security programs and annuity markets through which agents who are characterized by different distributions of length of lifetime share deathrelated risks when annuity markets operate a non discriminatory social security program affects only the intragenerational allocation of resources in the absence of private information regarding individual survival probabilities such a program will lead to a non optimal intragenerational allocation of resources however the presence of adverse selection considerations gives rise to a pareto improving role for a mandatory non discriminatory social security program

intergenerational transfers production and income distribution abstract we consider an overlapping generations economy where the aggregative production process uses physical capital and human capital intergenerational transfers from parents to their children are motivated by altruism we distinguish between two types of transfers investment of parents in the education of their offspring and capital transfer the gift bequest motive we show that the intensity of each type of altruism and hence the composition of the two types of transfers affect significantly the equilibrium output and the intragenerational income distributions comparing competitive equilibria from the same initial distributions of capital transfers and human capital we derive a the economy with the higher education inclined altruism attains lower output and more equal intragenerational income distributions if either the production function s elasticity of substitution is not large or the altruism is weak b for more bequest inclined altruism the effects are usually reversed c under public provision of education higher bequest inclined altruism results in lower output and less equal distribution of income in all dates

how working time reduction affects jobs and wages in 1996 by law the maximum standard workweek in portugal was reduced from 44 h to 40 h we find that for workers involved this change reduced the job separation rate and increased hourly wages keeping monthly earnings approximately constant the working hours reduction also affected workers working less than 40 h per week they were more likely to lose their job

an upper bound for wealth distribution in a model of accidental bequests abstract an explicit upper bound is calculated for wealth distribution in a model of overlapping generations with uncertain lifetimes and an imperfect annuities market

the effects of annuities bequests and aging in an overlapping generations model of endogenous growth we examine the effects of introducing actuarially fair annuity markets into an overlapping generations model of endogenous growth the complete annuitisation of agents wealth is not in general dynamically optimal the degree of annuitisation that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay as you go social security tax rate the government has an incentive to restrict the availability of actuarially fair annuities contracts and can often move the economy from a pay as you go to a fully funded social security system via voluntary contributions to a government sponsored actuarially fair pension today accompanied by reductions in social security taxes tomorrow

investing in socially responsible companies is a must for public pension funds because there is no better alternative with assets of over us 1 0 trillion and growing public pension funds in the united states have become a major force in the private sector through their holding of equity positions in large publicly traded corporations more recently these funds have been expanding their investment strategy by considering a corporation s long term risks on issues such as environmental protection sustainability and good corporate citizenship and how these factors impact a company s long term performance conventional wisdom argues that the fiduciary responsibility of the pension funds trustees must be solely focused on their beneficiaries and therefore their investment criteria must be based strictly on narrowly defined financial measures it is also asserted that well established financial measurements of corporate performance already include long term risk assessment through discounted present value of future flow of earnings consequently all other criteria are contrary to the best interest of the pension funds beneficiaries in this paper we assert that contrary to conventional wisdom pension funds and for that matter other mutual funds must be concerned with the long term survival and growth of corporations these measures are generally referred to socially responsible investing sri and when applied to corporations it is termed socially responsible corporate conduct srcc we demonstrate that current measurement of future risk assessment invariably understates and quite often completely overlooks these long term risks because of the inherent bias towards short run on the part of financial intermediaries whose compensation depends greatly on short term results furthermore there is ample evidence to suggest that these intermediaries have been engaging in self serving practices and thus failing in their duties to serve their clients i e pension funds best interests because of their large holdings in the total market as well as individual companies these funds cannot easily divest from poorly performing companies without destabilizing the companies stock and overall markets hence they must opt for a strategy of emphasizing investment criteria that encourage companies to take into account long term aspects of their operations in terms of their impact on environment sustainability and community welfare to name a few we argue that an exclusionary and even a primary focus on short term financial criteria is no longer a viable option it also calls for the pension funds to encourage greater transparency and accountability of the entire corporate sector through improved corporate governance thus socially responsible investing practices are not merely discretionary and desirable activities they are a necessary imperative which both the corporations and public pension funds and other large institutional holders will ignore at serious peril to themselves finally the paper considers some of the recent developments where corporations have been responding to these challenges and how their actions might be strengthened through greater disclosure and transparency of corporate activities it also makes recommendations for the pension funds to support further research in creating new measurement standards that further refine the concept of socially responsible investing as a necessary ingredient of long term corporate survival and growth in the context of a changing economic environmental and socio political dynamic

precautionary saving and accidental bequests this paper presents a simple general equilibrium model of precautionary saving and accidental bequests this model is used to analyze the implications of individual lifetime uncertainty for aggregate consumption and capital accumulation a precautionary demand for saving arises because an individual consumer does not know in advance the date at which he will die and he wants to avoid low levels of consumption in the event that he lives longer than expected an implication of this precautionary saving is that when death does occur the consumer is generally holding some wealth which is then passed on to his heirs in the form of an accidental bequest even if all consumers have the same ex ante mortality probabilities there will be some intracohort variation in the date of death consequently there will be a nondegenerate distribution of bequests left by consumers in a cohort this nondegenerate distribution of bequests left by one generation induces variation in the distributions of wealth consumption and bequests of subsequent generations the importance of bequests in aggregate saving has been established by laurence kotlikoff and lawrence summers 1981 who reported that 80 percent of u s household wealth is inherited wealth one interpretation of this finding is that the simple life cycle model without bequest motives is an inadequate description of saving behavior in the united states but the model i present demonstrates that accidental bequests by selfish consumers can account for a potentially sizeable fraction of aggregate wealth although some part of bequests especially by the wealthy undoubtedly results from an explicit bequest motive accidental bequests also play a role in the intergenerational transfer of wealth as well as in the intragenerational variation in wealth in order to focus on the role of accidental bequests i purposely exclude a bequest motive from the specification of the utility function the effects of lifetime uncertainty on individual consumption behavior were first examined formally in a seminal paper by menachem yaari 1965 yaari s model provided the basic framework for virtually all subsequent work on uncertain lifetimes including well known papers by nils hakansson 1969 stanley fischer 1973 robert barro and james friedman 1977 david levhari and leonard mirman 1977 and kotlikoff and avia spivak 1981 however all of these papers focused on the consumption decision of an individual and ignored the effect of accidental bequests on the behavior of the recipients of these accidental bequests 2 as will be shown at various points in this paper changes in the economic environment can have effects on aggregate behavior which differ sharply from the effects on individual behavior because of the endogenous adjustment of bequests the effects of department of economics harvard university cambridge ma 02138 this paper is a revised version of bequests and social security with uncertain lifetimes nber working paper no 1372 june 1984 i thank olivier blanchard john burbidge christopher cavanagh robert clower stanley fischer benjamin friedman elhanan helpman mervyn king nobuhiro kiyotaki laurence kotlikoff robert mcdonald james pesando julio rotemberg lawrence summers lars svensson mark watson and jeffrey wolcowitz for valuable conversations and correspondence i also thank the participants in seminars at boston university columbia university cornell university federal reserve board harvard university university of iowa mit university of minnesota university of montreal national bureau of economic research north carolina state university the wharton school and yale university and two anonymous referees for their helpful comments i also thank the national science foundation for financial support 1 in the presence of perfect annuity and life insurance markets there may or may not be bequests depending on the presence or absence of a bequest motive but there would be no accidental bequests 2 kotlikoff and spivak focus on the role of the family in providing an incomplete annuities market but stop short of a full scale overlapping generations model in which the distribution of bequests is determined endogenously

early and late human capital investments borrowing constraints and the family we develop a dynastic human capital investment framework to study the importance of family borrowing constraints and uninsured labor market risk as well as the process of intergenerational ability

informational diversity over time and the optimality of monetary equilibria abstract the temporal realizations of a random state variable in an overlapping generations model create an informational diversity between members of different generations and require a reexamination of the optimality that competitive equilibria might display in such an environment using an optimality criterion that reflects this informational diversity we prove the optimality of competitive equilibrium in a model with a fixed stock of fiat money a single spot market and good endowments that follow a markov process the need for an optimality criterion that incorporates informational diversity is further motivated by studying the same model with the operation of complete contingent commodities markets

conflict minerals and supply chain due diligence an exploratory study of multi tier supply chains as recently stakeholders complain about the use of conflict minerals in consumer products that are often invisible to them in final products firms across industries implement conflict mineral management practices conflict minerals are those whose systemic exploitation and trade contribute to human right violations in the country of extraction and surrounding areas particularly supply chain managers in the western world are challenged taking reasonable steps to identify and prevent risks associated with these resources due to the globally dispersed nature of supply chains and the opacity of the origin of commodities supply chain due diligence scdd represents a holistic concept to proactively manage supply chains reducing the likelihood of the use of conflict minerals effectively based on an exploratory study with 27 semi structured interviews within five european industries we provide insights into patterns of implementation key motivational factors barriers and enablers and impacts of scdd in mineral supply chains our results contribute to both theory and practice as we provide first insights to scdd practices and make recommendations for an industry wide implementation of scdd altogether this study provides the basis for future theory testing research in the context of scdd and conflict mineral management

an existence theorem on the stationary state of income distribution and population growth through a utility maximizing process individuals derive their optimal fertility and bequest decisions both as functions of their initial socioeconomic backgrounds the combination of these two decisions form a multi type galton watson process under weak assumptions it is proved that the economy will converge to a unique stationary state which implies both a constant population growth rate and a time invariant income distribution as such this paper extends the becker willis static micro level fertility demand model to a dynamic macro level population growth model alternatively our model can be viewed as a generalization of laitners stochastic income theory where no differential fertility is allowed excerpt

wage structure as implicit insurance on human capital in developed versus underdeveloped countries abstract this paper explores the role of wage structure as implicit insurance on human capital it illustrates how smaller wage differentials in the developed world can be welfare enhancing by acting as implicit insurance while larger wage differentials in underdeveloped countries make investments in human capital riskier in other words with smaller wage differentials the students in a developed country are insured against poor educational outcomes through the existence of well paid alternative employments which are not present in the economy of a less developed country this result arises as multiple equilibria in a general equilibrium model when there are no insurance markets for human capital

risk bearing and the theory of income distribution this paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality unlike previous work our approach takes explicit account of the reason for market incompleteness in modeling agents behaviour in particular the amount of risk borne is endogenous using a model of growth with altruism in which agents are risk averse and there is moral hazard we show that lineage wealth follows a markov process which converges globally to an ergodic distribution this also represents the long run population distribution of wealth we discuss the role of particular assumptions such as availability of production loans and unboundedness of utility in yielding the qualitative properties of the distribution of wealth the choice of occupation and the prevention of poverty traps