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Portfolio autarky: a welfare analysis

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  • John H. Kareken
  • Neil Wallace

Abstract

Portfolio autarky obtains when residents of every country are prohibited from owning real assets located in other countries. Such a regime and a laissez-faire regime, both characterized by free trade in goods, are studied in a model whose resource and technology assumptions are those of the standard two-country, two- (nonreproducible) factor, two- (nonstorable) good model. But to ensure a market for assets (land), the model is peopled by overlapping generations; each two-period lived individual supplies one unit of labor only in the first period of his life. Unique equilibria are described and shown to exist, and, in terms of a ?growth model? version of the Pareto criterion, laissez-faire is shown to be optimal and portfolio autarky to be nonoptimal.

Suggested Citation

  • John H. Kareken & Neil Wallace, 1976. "Portfolio autarky: a welfare analysis," Staff Report 9, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:9
    DOI: 10.21034/sr.9
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    References listed on IDEAS

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