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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.

Suggested Citation

  • Martin Kaae Jensen, 2012. "Distributional Comparative Statics," Discussion Papers 12-08, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:12-08
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    References listed on IDEAS

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    1. repec:oup:restud:v:85:y:2018:i:1:p:581-610. is not listed on IDEAS
    2. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    3. Dorfman, Robert, 1979. "A Formula for the Gini Coefficient," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 146-149, February.
    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    5. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    6. Daron Acemoglu & Martin Kaae Jensen, 2015. "Robust Comparative Statics in Large Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 587-640.
    7. Martin Kaae Jensen, 2012. "Distributional Comparative Statics," Discussion Papers 12-08, Department of Economics, University of Birmingham.
    8. Van Zandt, Timothy & Vives, Xavier, 2007. "Monotone equilibria in Bayesian games of strategic complementarities," Journal of Economic Theory, Elsevier, vol. 134(1), pages 339-360, May.
    9. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
    10. John K.-H Quah, 2007. "The Comparative Statics of Constrained Optimization Problems," Econometrica, Econometric Society, vol. 75(2), pages 401-431, March.
    11. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    12. Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Oxford University Press, vol. 38(4), pages 401-414.
    13. Charles N. Noussair & Stefan T. Trautmann & Gijs van de Kuilen, 2014. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 325-355.
    14. Mark Huggett, 2004. "Precautionary Wealth Accumulation," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 769-781.
    15. Cowan, Simon & Vickers, John & Aguirre Pérez, Iñaki, 2009. "Monopoly Price Discrimination and Demand Curvature," IKERLANAK 2009-39, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    16. Acemoglu, Daron & Jensen, Martin Kaae, 2013. "Aggregate comparative statics," Games and Economic Behavior, Elsevier, vol. 81(C), pages 27-49.
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    Cited by:

    1. Anwesha Banerjee & Nicolas Gravel, 2018. "Contribution To A Public Good Under Subjective Uncertainty," Working Papers halshs-01734745, HAL.
    2. repec:oup:restud:v:85:y:2018:i:1:p:581-610. is not listed on IDEAS
    3. Daron Acemoglu & Martin Kaae Jensen, 2015. "Robust Comparative Statics in Large Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 587-640.
    4. Camacho, Carmen & Kamihigashi, Takashi & Sağlam, Çağrı, 2018. "Robust comparative statics for non-monotone shocks in large aggregative games," Journal of Economic Theory, Elsevier, vol. 174(C), pages 288-299.
    5. Acikgoz, Omer, 2015. "On the Existence and Uniqueness of Stationary Equilibrium in Bewley Economies with Production," MPRA Paper 71066, University Library of Munich, Germany, revised 30 Apr 2016.
    6. repec:eee:jetheo:v:173:y:2018:i:c:p:18-55 is not listed on IDEAS
    7. Martin Kaae Jensen, 2012. "Distributional Comparative Statics," Discussion Papers 12-08, Department of Economics, University of Birmingham.

    More about this item

    Keywords

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

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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