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Wealth transfers and the role of collateral when lifetimes are uncertain

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  • Abdelkrim Seghir

    ()
    (American University of Beirut, Economics Department)

  • Juan Pablo Torres-Martinez

    ()
    (Department of Economics PUC-Rio)

Abstract

We develop a general equilibrium model of wealth transfers in the presence of uncertain lifetimes and default. Without introducing exogenous debt constraints, agents are allowed to make collateral-backed promises at any state of their life span.

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File URL: http://www.econ.puc-rio.br/pdf/td527.pdf
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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 527.

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Length: 28p
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:rio:texdis:527

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Keywords: Uncertain lifetimes; Collateralized Assets; Donations; Wills.;

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References

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  1. Cardia, Emanuela & Michel, Philippe, 2004. "Altruism, intergenerational transfers of time and bequests," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(8), pages 1681-1701, June.
  2. Magill, M. & Quinzii, M., 1992. "Infinite Horizon Incomplete Markets," Papers, California Davis - Institute of Governmental Affairs 413a, California Davis - Institute of Governmental Affairs.
  3. Pradeep Dubey & John Geanakoplos & Martin Shubik, 2005. "Default and Punishment in General Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 73(1), pages 1-37, 01.
  4. Leung, S.F., 1992. "Uncertain Lifetime, the Theory of the Consumer, and the Life Cycle Hypothesis," RCER Working Papers 323, University of Rochester - Center for Economic Research (RCER).
  5. Felix Kubler & Karl Schmedders, 2003. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Econometrica, Econometric Society, Econometric Society, vol. 71(6), pages 1767-1793, November.
  6. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(1), pages 102-130, October.
  7. Páscoa, Mário Rui & Seghir, Abdelkrim, 2009. "Harsh default penalties lead to Ponzi schemes," Games and Economic Behavior, Elsevier, Elsevier, vol. 65(1), pages 270-286, January.
  8. Luisa Fuster, 2000. "Capital Accumulation in an Economy with Dynasties and Uncertain Lifetimes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 650-674, October.
  9. d'Albis, Hippolyte, 2007. "Demographic structure and capital accumulation," Journal of Economic Theory, Elsevier, Elsevier, vol. 132(1), pages 411-434, January.
  10. Aloisio Araujo & M�rio Rui P�scoa & Juan Pablo Torres-Mart�nez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, Econometric Society, vol. 70(4), pages 1613-1638, July.
  11. Jonathan Skinner & Stephen P. Zeldes, 2002. "The Importance of Bequests and Life-Cycle Saving in Capital Accumulation: A New Answer," American Economic Review, American Economic Association, American Economic Association, vol. 92(2), pages 274-278, May.
  12. Abdelkrim Seghir, 2006. "An overlapping generations model with non-ordered preferences and numeraire-incomplete markets," Decisions in Economics and Finance, Springer, Springer, vol. 28(2), pages 95-112, 02.
  13. Luisa Fuster, 1999. "Effects of uncertain lifetime and annuity insurance on capital accumulation and growth," Economic Theory, Springer, Springer, vol. 13(2), pages 429-445.
  14. Abdelkrim SEGHIR, 2006. "Overlapping Generations Model with Incomplete Markets: The Numeraire Case II," Annales d'Economie et de Statistique, ENSAE, issue 81, pages 113-139.
  15. Florenzano, Monique & Gourdel, Pascal & Pascoa, Mario Rui, 2001. "Overlapping generations models with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 36(3), pages 201-218, December.
  16. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 706-32, August.
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Cited by:
  1. Ferreira, Thiago Revil T. & Torres-Martínez, Juan Pablo, 2009. "The impossibility of effective enforcement mechanisms in collateralized credit markets," MPRA Paper 13781, University Library of Munich, Germany.
  2. Michael Magill & Martine Quinzii, 2014. "Prices and Investment with Collateral and Default," Working Papers, University of California, Davis, Department of Economics 143, University of California, Davis, Department of Economics.
  3. Rubén Poblete-Cazenave & Juan Pablo Torres-Martínez, 2010. "Equilibrium with limited-recourse collateralized loans," Working Papers, University of Chile, Department of Economics wp313, University of Chile, Department of Economics.
  4. Barnett, Richard C. & Bhattacharya, Joydeep & Bunzel, Helle, 2013. "Deviant Generations, Ricardian Equivalence, and Growth Cycles," Staff General Research Papers 12939, Iowa State University, Department of Economics.
  5. Seghir, Abdelkrim & Salem, Sherif, 2010. "In nitely-lived agents via two-sided altruism," MPRA Paper 31379, University Library of Munich, Germany.

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