Atsushi Kajii (Institute of Policy and Planning Sciences, University of Tsukuba, Ibaraki 305, JAPAN) Antonio Villanacci (DIMADEFAS, Università degli Studi, I-50134 Firenze, ITALY) Alessandro Citanna (GSIA, Carnegie Mellon University, Pittsburgh, PA 15213, USA)
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In this paper we re-examine generic constrained suboptimality of equilibrium allocations with incomplete numeraire asset markets. We provide a general framework which is capable of resolving some issues left open by the previous literature, and encompasses many kinds of intervention in partially controlled market economies. In particular, we establish generic constrained suboptimality, as studied by Geanakoplos and Polemarchakis, even without an upper bound on the number of households. Moreover, we consider the case where asset markets are left open, and the planner can make lump-sum transfers in a limited number of goods. We show that such a perfectly anticipated wealth redistribution policy, though consistent with the assumed incomplete financial structure, is typically effective.
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Article provided by Springer in its journal Economic Theory.
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Find related papers by JEL classification: C60 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - General D60 - Microeconomics - - Welfare Economics - - - General D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
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