Inequalities
Inequalities
This chapter makes adaptations to the canonical models of the term structure developed so far, to recognize inequalities as crucial features of our world, arguing that even abstracting from the heterogeneous allocation of costs and benefits, the existence of huge wealth inequalities between and within countries necessitates such an adaptation. Two models are considered. In the first model, inequalities in society are introduced in the model examined in Part I of this book. However, it is assumed that individuals in this unequal society are able to share risk efficiently, and that they can implement mutually beneficial long-term credit contracts. In the second model, these assumptions are relaxed.
Keywords: inequalities, canonical models, term structure, wealth inequalities, adaptations, unequal society, long-term credit contracts
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