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Asset Market Structure and Growth

Author

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  • Pighi Braila

    (CSEF, Università di Salerno, and CORE, UCL Belgium)

  • Alessandro Turrini

    (Università di Bergamo and Centro Luca Dagliano, Università Luigi Bocconi, Italy)

Abstract

In this paper we illustrate the possible normative relevance of the links between human capital and financial assets via an example related to growth. Human capital investments occur in a risky environment, in that they are subject to aggregate uncertainty. Agents are heterogenous in their income streams, and this generates different risk attitudes and the scope for trading in financial assets. In this environment, human capital is a non-marketable asset that interacts with the existing financial structure in transferring wealth over time.When the financial structure is complete, growth is indeterminate because individual allocations between human capital and a tradable asset are indeterminate. When the financial structure is incomplete, the growth rate depends on the payoff structure of the assets. An issue of optimality for the structure of asset returns is raised.

Suggested Citation

  • Pighi Braila & Alessandro Turrini, 2000. "Asset Market Structure and Growth," CSEF Working Papers 45, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:45
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    File URL: http://www.csef.it/WP/wp45.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Incomplete Markets; Human Capital; Growth;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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