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Integrated Aggregation in Dynamic Economies

Author

Listed:
  • Laura Marsiliani

    (Durham Business School)

  • Thomas I. Renstroem

    (Durham Business School)

Abstract

The paper provides necessary and sufficient conditions for aggregation of heterogeneous individuals in dynamic economies, when individuals differ in abilities as well as in capital endowments, and when there are distortionary taxes. The aggregation theorems imply that the competitive equilibrium can be represented as if there was only one individual in the economy. This considerably facilitates analysis of the aggregate economy, such as stability analysis, as well as of the distribution of wealth. Furthermore, the paper provides conditions under which a representative individual coincides with one of the individuals in the economy.

Suggested Citation

  • Laura Marsiliani & Thomas I. Renstroem, 2009. "Integrated Aggregation in Dynamic Economies," Department of Economics Working Papers 2009_04, Durham University, Department of Economics.
    • Handle: RePEc:dur:durham:2009_04
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    File URL: http://dro.dur.ac.uk/10360
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    References listed on IDEAS

    as
    1. Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(4), pages 401-414.
    2. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
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    Keywords

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    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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