CONCLUSION

In this chapter we have discussed a variety of topics that lie in the somewhat fuzzy inter­section of income distribution and macroeconomics. The choice of topics and approaches has surely been idiosyncratic, reflecting our tastes, interests, and expertise, and we have left out many topics from behavioral and nonoptimizing models to issues in development, to the analysis of the impact of the rise of inequality on the U.S.

We are very aware that a very different chapter covering the same could be written by other authors (in fact, the next chapter includes an example of this by providing some very different ideas of macro modeling of the wealth distribution). But we hope that this chapter has provided an idea of how macroeconomics is explicitly incorporating the anal­ysis of inequality to improve our understanding of the dynamics of the aggregate econ­omy, and also of how the discipline that macroeconomics brings to the table—that all pieces have to be mutually consistent and that dynamics is at the core of economics— shapes the way we think about income and wealth inequality.

ACKNOWLEDGMENTS

We are grateful for the comments from many people over the years. Many people contributed direct com­ments about and calculations for this paper. They include the editors for this handbook, but also Makoto Nakajima, Mariacristina De Nardi, Josep Pijoan-Mas, and Thomas Piketty. Others, such as David Wiczer and Moritz Kuhn, made even more direct contributions. We received research assistance from Kai Ding and Gero Dolfus, comments by Sergio Salgado and Annaliina Soikkanen, and editorial help from Joan Gieseke.

17

Pijoan-Mas and Rios-Rull (2014) argue that the welfare cost of inequality in life spans dwarfs that of inequality in consumption.

We thank all ofthem. Rios-Rull thanks the National Science Foundation forgrant SES-1156228. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minne­apolis or the Federal Reserve System.

APPENDIX A. DERIVATION OF THE INEQUALITY INDEX

In each period, there are different cohorts of workers who have been employed for j periods. They also differ in terms of initial human capital h0 at birth. Because workers

APPENDIX B. WAGE EQUATION WITH ENDOGENOUS DEBT

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