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Competitive Equilibria of Economies with a Continuum of Consumers and Aggregate Shocks

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  • Jianjun Miao

Abstract

This paper studies competitive equilibria of a production economy with aggregate productivity shocks. There is a continuum of consumers who face borrowing constraints and individual labor endowment shocks. The dynamic economy is described in terms of sequences of aggregate distributions. The existence of sequential competitive equilibria is proven and a recursive characterization is established. In particular, it is shown that for any sequential competitive equilibrium, there exists a payoff equivalent sequential competitive equilibrium that is generated by a suitably defined recursive equilibrium with state variables including continuation value.

Suggested Citation

  • Jianjun Miao, 2004. "Competitive Equilibria of Economies with a Continuum of Consumers and Aggregate Shocks," CEMA Working Papers 460, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:460
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    Keywords

    competitive equilibrium; recursive equilibrium; aggregate distribution; heterogeneity; incomplete markets;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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