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Explaining structural change towards and within the financial sector

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  • Josef Falkinger
  • Sabrina Studer
  • Yingnan Zhao

Abstract

This paper presents a 3x3 general equilibrium model of an OLG-economy with technological uncertainty, heterogeneous agents and quasi-homothetic preferences to analyze structural change between the real and the financial sector as well as within the financial sector. Besides the consumption and investment good two types of financial services are produced. The three factors of production are: Capital, skilled and unskilled labor. Financial services are needed for transforming savings into future consumption possibilities. The financial market provides deposits and an incomplete set of securities. Payoffs of assets are determined by the future profitability of the technolo- gies in which they are invested. We show the channels through which structural change and inequality reinforce each other and show how they simultaneously emerge from rising per-capita income, an increase in skill supply and technical change.

Suggested Citation

  • Josef Falkinger & Sabrina Studer & Yingnan Zhao, 2015. "Explaining structural change towards and within the financial sector," ECON - Working Papers 206, Department of Economics - University of Zurich.
  • Handle: RePEc:zur:econwp:206
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    References listed on IDEAS

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    More about this item

    Keywords

    Structural change; financialization; quasi-homothetic portfolio decision; inequality;

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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