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On a Unique Nondegenerate Distribution of Agents in the Huggett Model

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  • Kam, Timothy

Abstract

A theoretical curiosity remains in the Huggett [1993] model as to the possible existence of a unique and degenerate stationary distribution of agent types. This coincides with the possibility that an equilibrium individual state space may turn out to be trivial in the sense that every agent never escapes the binding common borrowing constraint. In this note, we extend and reinforce the proof of Lemma 3 in Huggett [1993]. By invoking a simple comparative-static argument, we establish that Huggett's result of a unique stationary equilibrium distribution of agents must be one that is nontrivial or nondegenerate.

Suggested Citation

  • Kam, Timothy, 2010. "On a Unique Nondegenerate Distribution of Agents in the Huggett Model," PIE/CIS Discussion Paper 478, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:piecis:478
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    Keywords

    Compactness; Individual state space; Stationary distribution;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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