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Distributional Comparative Statics

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  • Martin Kaae Jensen

Abstract

An important set of questions in economics concern how changes in the distribution of economic parameters (income, wealth, productivity, distortions, information, etc.) impact individual choices and market outcomes. We currently do not have tools to answer such questions. In this paper, I develop a theory of distributional comparative statics that addresses this set of issues. Central to the developments is a new concept called strategic risk-aversion which determines the outcome of the most distributional comparative statics exercises. As illustrations, I analyze the relationship between savings and the inequality, ask how risk influences agents' behavior in Bayesian games, and study con-cavity of policy functions in general stochastic dynamic programming problems.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/12-08.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 12-08.

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Length: 41 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:bir:birmec:12-08

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Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk
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Related research

Keywords: Comparative statics; strategic risk-aversion; income distribution; inequality; uncertainty; Bayesian games; dynamic stochastic general equilibrium models; concavity; convexity; policy functions; arg max correspondence;

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References

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  1. Mark Huggett, 2004. "Precautionary Wealth Accumulation," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 769-781.
  2. Daron Acemoglu & Martin Kaae Jensen, 2012. "Robust Comparative Statics in Large Dynamic Economies," Levine's Working Paper Archive 786969000000000507, David K. Levine.
  3. Noussair, C.N. & Trautmann, S.T. & Kuilen, G. van de, 2011. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," Discussion Paper 2011-055, Tilburg University, Center for Economic Research.
  4. I�aki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-15, September.
  5. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  6. Acemoglu, Daron & Jensen, Martin Kaae, 2009. "Aggregate Comparative Statics," CEPR Discussion Papers 7254, C.E.P.R. Discussion Papers.
  7. John K.-H Quah, 2007. "The Comparative Statics of Constrained Optimization Problems," Econometrica, Econometric Society, vol. 75(2), pages 401-431, 03.
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Cited by:
  1. Daron Acemoglu & Martin Kaae Jensen, 2012. "Robust Comparative Statics in Large Dynamic Economies," Levine's Working Paper Archive 786969000000000507, David K. Levine.

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