Capital Accumulation in Private Information Economies
AbstractThis paper provides a general methodology for introducing capital accumulation into economies with private information and heterogeneous agents. The agents operate a stochastic neoclassical production technology with capital and labor input. I study a moral hazard economy with unobservable input (hidden action). I characterize the efficient allocation of capital, labor, and consumption in a stationary recursive competitive equilibrium. The economy is decentralized by the component planner approach developed by Atkeson and Lucas (1995). Accumulation of capital is facilitated by a "capital planner" who serves as a financial intermediary for the component planners. In the unique, feasible and non-degenerate stationary equilibrium, private information lowers the market-clearing interest rate below agents' discount rate.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 5 (2005)
Issue (Month): 1 (December)
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