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...

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...

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...

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...

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,...

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...

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...

This paper analyzes the welfare effects of business cycles when workers face uninsurable idiosyncratic labor income risk that has a cyclical component. In accordance with the recent literature, this paper assumes that eliminating business cycles amounts to integrating out aggregate shocks (the...

This paper examines the welfare of consumers in an incomplete markets economy with extrinsic uncertainty. It is shown that the utility of one consumer may be minimized at the Walrasian allocation relative to all other equilibrium allocations for a given security structure. Thus, this consumer...

A transport noise-pricing model is developed, which distinguishes between transport sound externalities, real resource costs of transport noise externalities and monetary valuations of such costs. It differs from existing approaches (hedonic pricing and contingent valuation), which aim at...