Peer group effects in applied general equilibrium
AbstractIn this paper, I develop an applied general equilibrium environment with peer group effects. The application I consider is schooling. The framework used here is general equilibrium with clubs. I establish the existence of equilibrium for the economy with a finite number of school types. This result is then extended to the case where the set of school types is a continuum. The two welfare theorems are shown to hold for both economies. To compute the equilibrium, I construct a Negishi mapping from the set of weights on individual type's utility to the set of transfers that support the corresponding Pareto allocations as competitive equilibria with transfers. Because this mapping is a correspondence, a version of Scarf's algorithm is used to find a competitive equilibrium.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 17 (2001)
Issue (Month): 1 ()
Note: Received: June 9, 1999; revised version: March 13, 2000
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Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- I2 - Health, Education, and Welfare - - Education
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