Stationary Equilibrium In An Altruistic Two Sector Economy
We study an overlapping generations economy with altruistic agents in which the productivity of a child?s labour endowment depends on an idiosyncratic shock and on the resources spent by her parent in education her. The parent cannot borrow but can leave a nonnegative bequest which earns a deterministic return in the capital market; this possibility mitigates the liquidity constraint faced by an agent when deciding on the level of education for her child. The shock is assumed to follow a Markov process thus allowing for serial correlation in abilities. A stationary equilibrium of the model is a situation in which the endogenously determined aggregate amounts of capital and efficiency units of labour remain constant, so factor prices are constant, the choices made by agents can be summarized via an invariant distribution, and factor supplies are determined by the mean, taken with respect to the invariant distribution, of the agents? decision rules, and all the markets clear. We develop and discuss conditions under which a stationary equilibrium exists.
|Date of creation:||Feb 2003|
|Publication status:||Published by Ivie|
|Contact details of provider:|| Postal: C/ Guardia Civil, 22, Esc 2a, 1o, E-46020 VALENCIA|
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Web page: http://www.ivie.es/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-1406, November.
- Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
- Aiyagari, S Rao, 1995.
"Optimal Capital Income Taxation with Incomplete Markets, Borrowing Constraints, and Constant Discounting,"
Journal of Political Economy,
University of Chicago Press, vol. 103(6), pages 1158-1175, December.
- S. Rao Aiyagari, 1994. "Optimal capital income taxation with incomplete markets, borrowing constraints, and constant discounting," Working Papers 508, Federal Reserve Bank of Minneapolis.
- Gary Chamberlain & Charles A. Wilson, 2000.
"Optimal Intertemporal Consumption Under Uncertainty,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 365-395, July.
- Huggett, Mark, 1997. "The one-sector growth model with idiosyncratic shocks: Steady states and dynamics," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 385-403, August.
- S. Rao Aiyagari, 1994.
"Uninsured Idiosyncratic Risk and Aggregate Saving,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 109(3), pages 659-684.
- Schechtman, Jack & Escudero, Vera L. S., 1977. "Some results on "an income fluctuation problem"," Journal of Economic Theory, Elsevier, vol. 16(2), pages 151-166, December.
- Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
- Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-867, June.
- Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
- Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 58(2), pages 135-170, December.
When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2003-07. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición)
If references are entirely missing, you can add them using this form.