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...

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...

Focusing on tax policy with incomplete asset markets, we create a framework for proving the existence of Pareto improving taxes, for computing them, and for bounding the improvement. The protagonist is the price adjustment following an intervention. If the price adjustment is sufficiently...

In this paper we use global analysis to study the welfare properties of general equilibrium economies with incomplete markets (GEI). Our main result is to show that constrained Pareto optimal equilibria are contained in a linear submanifold of the equilibrium set. This result is explicitly...

Short and long run production is introduced in a two period general equilibrium model with incomplete markets, where firms are profit maximizers. They maximize profits in the long run, which implies profit maximization over both periods. The sequential structure of the model is such that, firms...

In this paper we use global analysis to study the welfare properties of general equilibrium economies with incomplete markets (GEI). Our main result is to show that constrained Pareto optimal equilibria are contained in a submanifold of the equilibrium set. This result is explicitly derived for...

This paper considers the financing of production in a two period general equilibrium model with incomplete markets. This requires a model where the efficient boundary of the production set available to a producer in period two in every state of the world is not independent of the financial...

This paper studies the welfare properties of competitive equilibria in an economy with incomplete markets subject to idiosyncratic and aggregate shocks. We focus on the role of securitization, whereby borrowers can reduce idiosyncratic asset risk, which enables increased leverage and investment....

I model an incomplete markets economy where unaware agents do not perceive all states of nature, so unintended default can occur when asset returns differ from what was perceived. The presence of default plays a crucial role in the proof of existence - particularly in economies where beliefs are...

We study a strategic market game with finitely many traders, infinite horizon and real assets. To this standard framework (see, e.g. Giraud and Weyers, 2004) we add two key ingredients: First, default is allowed at equilibrium by means of some collateral requirement for financial assets; second,...