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From the literature of incomplete market (e.g. Aiyagary 1993,1994), it seems to be the case that:

  • With complete markets, the capital distribution in the final steady state depends on the distribution in the initial steady state.
  • With incomplete markets, the capital distribution in the final steady is independent from the distribution in the initial steady state.

My first question regards the correctness of that claim.

The second one is the following: if that is correct, what is the economic intuition? Why the initial wealth (or asset, or capital) distribution is irrelevant for the steady state in incomplete market case while it matters in the complete market case?

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