This paper studies a closed economy with a continuum of agents and moral hazard. Economic agents in the economy operate a stochastic production technology with capital and labor inputs in which the latter is private information. I characterize efficient allocations of capital, labor, and consumption in a stationary recursive equilibrium for a decentralized economy with component planners. Allocation and accumulation of capital are facilitated by a 'capital planner' who serves as a financial intermediary for the component planners. In equilibrium, private information lowers the equilibrium interest rate below agents' discount rate and I show that contrary to the private-information endowment economies, a moral-hazard productive economy can exhibit both endogenous lower and upper bounds on the stationary distribution of utility entitlements.
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Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Workshop Papers, January 2001 with number
1B.2.
Length: Date of creation: 04 Jan 2001 Date of revision: Handle: RePEc:ams:cdws01:1b.2
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Find related papers by JEL classification: C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
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