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Robust Comparative Statics in Large Dynamic Economies

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  • Daron Acemoglu
  • Martin Kaae Jensen

Abstract

We consider infinite horizon economies populated by a continuum of agents who are subject to idiosyncratic shocks. This framework contains models of saving and capital accumulation with incomplete markets in the spirit of works by Bewley, Aiyagari, and Huggett, and models of entry, exit and industry dynamics in the spirit of Hopenhayn's work as special cases. Robust and easy-to-apply comparative statics results are established with respect to exogenous parameters as well as various kinds of changes in the Markov processes governing the law of motion of the idiosyncratic shocks. These results complement the existing literature which uses simulations and numerical analysis to study this class of models and are illustrated using a number of examples.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000507.

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Date of creation: 11 Sep 2012
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Handle: RePEc:cla:levarc:786969000000000507

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  5. Mark Huggett, 2003. "Precautionary Wealth Accumulation," Working Papers gueconwpa~03-03-09, Georgetown University, Department of Economics.
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Cited by:
  1. Sanjay Jain & Sumon Majumdar & Sharun Mukand, 2014. "Walk the Line: Conflict, State Capacity and the Political Dynamics of Reform," CESifo Working Paper Series 4648, CESifo Group Munich.
  2. Jain, Sanjay & Majumdar, Sumon & Mukand, Sharun, 2013. "Walk the Line: Conflict, State Capacity and the Political Dynamics of Reform," CAGE Online Working Paper Series 156, Competitive Advantage in the Global Economy (CAGE).
  3. Daron Acemoglu & Martin Kaae Jensen, 2012. "Robust Comparative Statics in Large Dynamic Economies," Levine's Working Paper Archive 786969000000000507, David K. Levine.
  4. Acikgoz, Omer, 2013. "Transitional Dynamics and Long-run Optimal Taxation Under Incomplete Markets," MPRA Paper 50160, University Library of Munich, Germany.
  5. repec:cge:warwcg:155 is not listed on IDEAS
  6. Martin Kaae Jensen, 2012. "Distributional Comparative Statics," Discussion Papers 12-08, Department of Economics, University of Birmingham.

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