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Limits to redistribution and intertemporal wedges : implications of Pareto optimality with private information

  • Borys Grochulski

Numerous recent studies on macroeconomic policy--including monetary policy and tax policy--have incorporated private information in their models of the economy. In such models, characterization of Pareto-optimal allocations is an important step of analysis. In this article, we study Pareto optima in a simple model economy with heterogeneous agents. We characterize and compare all Pareto-optimal allocations both with and without private information. We also demonstrate the limits to redistribution and intertemporal distortions that arise as implications of Pareto optimality with private information.

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File URL: http://www.richmondfed.org/publications/research/economic_quarterly/2008/spring/pdf/grochulski.pdf
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Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (2008)
Issue (Month): Spr ()
Pages: 173-196

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Handle: RePEc:fip:fedreq:y:2008:i:spr:p:173-196:n:v.94no.2
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