Golosov, Mikhail; Kocherlakota, Narayana; Tsyvinski, Aleh - In: Review of Economic Studies 70 (2003) 3, pp. 569-587
We consider an environment in which agents' skills are private information and follow arbitrary stochastic processes. We prove that it is typically Pareto optimal for an individual's marginal benefit of investing in capital to exceed his marginal cost of doing so. This wedge is consistent with a...
