IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v114y2024i11p3669-3713.html
   My bibliography  Save this article

Micro Risks and (Robust) Pareto-Improving Policies

Author

Listed:
  • Mark Aguiar
  • Manuel Amador
  • Cristina Arellano

Abstract

We provide conditions for the feasibility of robust Pareto-improving (RPI) policies when markets are incomplete and the interest rate is below the growth rate. We allow for arbitrary heterogeneity in preferences and income risk and a wedge between the return to capital and bonds. An RPI improves risk sharing and can induce a more efficient level of capital. Elasticities of aggregate savings to changes in interest rates are the crucial ingredients to the feasibility of RPIs. Government debt may complement rather than substitute for capital in an RPI. Our analysis emphasizes the welfare-improving qualities of government bonds versus explicit redistribution.

Suggested Citation

  • Mark Aguiar & Manuel Amador & Cristina Arellano, 2024. "Micro Risks and (Robust) Pareto-Improving Policies," American Economic Review, American Economic Association, vol. 114(11), pages 3669-3713, November.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:11:p:3669-3713
    DOI: 10.1257/aer.20230128
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20230128
    Download Restriction: no
    File URL: https://doi.org/10.3886/E205362V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20230128.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20230128.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/aer.20230128?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:114:y:2024:i:11:p:3669-3713. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.