Our simple model features agents heterogeneous in skill and risk aversion, incomplete financial markets, and redistributive taxation. In equilibrium, agents become entrepreneurs if their skill is sufficiently high or risk aversion sufficiently low. Under heavier taxation, entrepreneurs are more...

This article reviews macroeconomic models with heterogeneous households. A key question for the relevance of these models concerns the degree to which markets are complete. This is because the existence of complete markets imposes restrictions on (i) how much heterogeneity matters for aggregate...

The primary aim of this study is to analyze the impact of imperfections in capital markets on individuals' lifetime allocation plans and the resulting implications for income distribution. The model builds upon Samuelson's overlapping generation model with human capital and bequest motives...

This paper examines the role of lumpy consumer durables and market power in generating endogenous cycles which seem to be consistent with the facts. When goods are durable, past consumption choices determine the current market size which consists of consumers who have not purchased the good...

This paper investigates the importance of firm-to-firm production network linkages for earnings inequality. We develop a quantitative model in which heterogeneous firms hire workers of different abilities in an imperfectly competitive labor market and source intermediates from heterogeneous...