Showing 1 - 10 of 54
Introducing default and limited collateral into general equilibrium allows for a theoery of endogenous contracts, .. …
Persistent link: https://www.econbiz.de/10005342221
When asset markets are incomplete there are almost always many Pareto improving policy interventions. Remarkably, these interventions do not involve adding any new markets. Focusing on tax policy, I create a framework for proving the existence of Pareto improving taxes, for computing them, and...
Persistent link: https://www.econbiz.de/10005063553
In spite of fiat money is useless in a standard Arrow-Debreu model, in this paper we will show that this does not hold true anymore when goods are indivisible. In our setting, although fiat money yields no utility, its price will always be positive and the set of equilibrium allocations changes...
Persistent link: https://www.econbiz.de/10005699608
Does the Pareto criterion discriminate among policy choices when the policymaker does not know the correct model of the economy? If the policymaker can specify ex ante preferences for each agent, there will typically be some policy change that improves the welfare of each agent relative to a...
Persistent link: https://www.econbiz.de/10005702668
Efficient investment in human capital is a subject of great concern among economists. By means of an overlapping-generations macrodynamic model with credit constraints, imperfect insurance and exogenous labor supply, we appraise inefficiencies related to misinvestment in human capital and...
Persistent link: https://www.econbiz.de/10005699613
We study an economy where there are two types of assets. Consumers' promises are the primitive defaultable assets secured by collateral chosen by the consumers themselves. The purchase of these personalized assets by ¯- nancial intermediaries is ¯nanced by selling back derivatives to...
Persistent link: https://www.econbiz.de/10005699616
We show that even under incomplete markets, the equilibrium manifold identifies individual demands everywhere in their domains. For this, we assume conditions of smoothness, interiority and regularity, but avoid implausible observational requirements. It is crucial that there be date-zero...
Persistent link: https://www.econbiz.de/10005702624
In economies with private firm ownership, when markets are incomplete, and firm shareholders change over time, there is no broad agreement on what ought to be a firm's objective. It is shown that ex-post, profit maximization is consistent with shareholder preferences in such economies; that is,...
Persistent link: https://www.econbiz.de/10005702667
We study the role an illiquid durable consumption good plays in determining the level of precautionary savings and the distribution of wealth in a standard Aiyagari model (i.e. a model with heterogeneous agents, idiosyncratic uncertainty, and borrowing constraints). Transactions costs induce an...
Persistent link: https://www.econbiz.de/10005702669
When asset markets are incomplete there are almost always many Pareto improving policy interventions, provided there are multiple commodities and households. Remarkably, these interventions do not involve adding any new markets. Focusing on tax policy, I create a framework for proving the...
Persistent link: https://www.econbiz.de/10005702672