Beschreibung:
<jats:title>Abstract</jats:title><jats:p>Most macroeconomic models are based on the assumption of a single homogeneous consumption good. In the present paper we consider a model with two goods: a basic good and a luxury good. We then apply this assumption to a standard general equilibrium heterogeneous agent model. We find a substantial reduction in precautionary savings compared to a standard model. The effect on wealth inequality turns out to be ambiguous and to depend on the size of the assumed earnings risk.</jats:p>