in preference heterogeneity. It develops a model with both uninsurable idiosyncratic income risk and risk aversion … heterogeneity to quantify their effects on wealth inequality. The results show that with the available estimates of the risk …, the share of wealth held by the top 1% is still substantially underestimated. It is also shown that models without risk …

We develop a tractable model to study jointly the role of non-diversifiable risk and financial frictions for business … cycles. Non-diversifiable risk induces strong precautionary motives, which reduce the exposure of entrepreneurs to aggregate … fluctuations in asset prices and risk premia, thus making the economy more resilient to financial shocks. We provide microeconomic …