Concentration of capital ownership and investment fluctuations

Zvi Hercowitz*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper is motivated by the observation that investment tends to accelerate when output is around trend. The model used to explain this observation is based on the capacity-constrained production setup in Hansen and Prescott [(2001) Manuscript], where capacity is constant over time, and on capital being owned by a fraction of the agents in the economy. When capacity is reached, the capital share increases because its component from capacity ownership becomes positive. The concentration of capital ownership leads then to an acceleration of investment-generated by the desire of capital owners to smooth consumption-as well as to a deceleration of total consumption. The results from the calibrated model contribute, although only partially, to the explanation of the observed behavior.

Original languageEnglish
Pages (from-to)668-686
Number of pages19
JournalReview of Economic Dynamics
Issue number3
StatePublished - Jul 2004


FundersFunder number
Tel Aviv University


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