Incomplete Market Dynamics in a Neoclassical Production Economy
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In this paper, the authors investigate a neoclassical economy with heterogeneous agents, convex technologies and idiosyncratic production risk, and they show that investment risk combined with precautionary savings generates rich effects that do not arise in the presence of pure endowment risk.About:
This article is published in Journal of Mathematical Economics.The article was published on 2005-08-01 and is currently open access. It has received 31 citations till now. The article focuses on the topics: Precautionary savings & Incomplete markets.read more
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The distribution of wealth and …scal policy in economies with …nitely lived agents
Jess Benhabib,Alberto Bisin +1 more
TL;DR: In this paper, the authors study the dynamics of the distribution of wealth in an overlapping generation economy with finite-lived agents and inter-generational transmission of wealth and show that the stationary wealth distribution is a Pareto distribution in the right tail and that it is capital income risk rather than labor income that drives the properties of the right-tail of the wealth distribution.
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Uninsured Idiosyncratic Investment Risk and Aggregate Saving
Abstract: This paper augments the neoclassical growth model to study the macroeconomic effects of idiosyncratic investment risk. The general equilibrium is solved in closed form under standard assumptions for preferences and technologies. Relative to complete markets, the steady state is characterized by both a lower interest rate and a lower capital stock when the elasticity of intertemporal substitution is sufficiently high. For plausible calibrations of the model, the reduction in aggregate savings and income is quantitatively significant. Finally, cyclical variation in private investment risks is shown to amplify the transitional dynamics.
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The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents
Jess Benhabib,Alberto Bisin +1 more
TL;DR: In this article, the authors study the dynamics of the distribution of wealth in an overlapping generation economy with finitely lived agents and intergenerational transmission of wealth, and show that the stationary wealth distribution is a Pareto distribution in the right tail and that it is capital income risk, rather than labor income, that drives the properties of the wealth distribution.
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Uninsured idiosyncratic investment risk and aggregate saving
TL;DR: In this paper, the authors augment the neoclassical growth model to study the macroeconomic effects of uninsured idiosyncratic investment, or capital-income, risk, showing that the steady state is characterized by both a lower interest rate and a lower capital stock when the elasticity of intertemporal substitution is higher than the fraction of private equity in total wealth.
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Skewed Wealth Distributions: Theory and Empirics
Jess Benhabib,Alberto Bisin +1 more
TL;DR: In this paper, the authors categorize the theoretical studies on the distribution of wealth in terms of the underlying economic mechanism generating skewness and thick tails, and show how these mechanisms can be microfounded by the consumption-saving decisions of rational agents in speci c economic and demographic environments.
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Income Distribution and Macroeconomics
Oded Galor,Joseph Zeira +1 more
TL;DR: The authors analyzes the role of wealth distribution in macroeconomics through investment in human capital and shows that the initial distribution of wealth affects aggregate output and investment both in the short and in the long run, as there are multiple steady states.
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Uninsured Idiosyncratic Risk and Aggregate Saving
TL;DR: In this article, the authors present a qualitative and quantitative analysis of the standard growth model modified to include precautionary saving motives and liquidity constraints, and address the impact on the aggregate saving rate, the importance of asset trading to individuals, and the relative inequality of wealth and income distributions.
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Income and Wealth Heterogeneity in the Macroeconomy
Per Krusell,Anthony A. Smith +1 more
TL;DR: In this paper, a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity is used to analyze how movements in the distribution of income and wealth affect the macroeconomy.
Book
Recursive Macroeconomic Theory
TL;DR: In this paper, an introduction to recursive methods for dynamic macroeconomics is presented, including standard applications such as asset pricing, and advanced material, including analyses of reputational mechanisms and contract design.