We recast the Aiyagari-Bewley-Huggett model of income and wealth distribution in continuous time.This workhorse model -as well as heterogeneous agent models more generally -then boils down to a system of partial differential equations, a fact we take advantage of to make two types of contributions.First, a number of new theoretical results: (i) an analytic characterization of the consumption and saving behavior of the poor, particularly their marginal propensities to consume; (ii) a closed-form solution for the wealth distribution in a special case with two income types; (iii) a proof that there is a unique stationary equilibrium if the intertemporal elasticity of substitution is weakly greater than one; (iv) characterization of "soft" borrowing constraints.Second, we develop a simple, efficient and portable algorithm for numerically solving for equilibria in a wide class of heterogeneous agent models, including -but not limited to -the Aiyagari-Bewley-Huggett model.
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