Tirelli, Mario; Turner, Sergio - 2007
It is known that the incompleteness of asset markets causes inefficiency in almost every equilibrium. Yet unexplored is … the ”size” of this inefficiency. The size of a Pareto improvement is the total willingness to pay for it, out of current … consumption. Inefficiency is the maximum size of any Pareto improving reallocation. Inefficiency of US consumption in middle age …