  This paper analyzes the equilibrium distribution of wealth in an economy
where firms' productivities are subject to idiosyncratic shocks, returns on
factors are determined in competitive markets, dynasties have linear
consumption functions and government imposes taxes on capital and labour
incomes and equally redistributes the collected resources to dynasties. The
equilibrium distribution of wealth is explicitly calculated and its shape
crucially depends on market incompleteness. In particular, a Paretian law in
the top tail only arises if capital markets are incomplete. The Pareto exponent
depends on the saving rate, on the net return on capital, on the growth rate of
population and on portfolio diversification. On the contrary, the
characteristics of the labour market mostly affects the bottom tail of the
distribution of wealth. The analysis also suggests a positive relationship
between growth and wealth inequality.
