Working Paper: NBER ID: w18178
Authors: Daron Acemoglu; Martin Kaae Jensen
Abstract: We consider infinite horizon economies populated by a continuum of agents who are subject to idiosyncratic shocks. This framework contains models of saving and capital accumulation with incomplete markets in the spirit of works by Bewley, Aiyagari, and Huggett, and models of entry, exit and industry dynamics in the spirit of Hopenhayn's work as special cases. Robust and easy-to-apply comparative statics results are established with respect to exogenous parameters as well as various kinds of changes in the Markov processes governing the law of motion of the idiosyncratic shocks. These results complement the existing literature which uses simulations and numerical analysis to study this class of models and are illustrated using a number of examples.
Keywords: No keywords provided
JEL Codes: C61; D90; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Positive shocks to any subset of agents not of measure zero (D80) | Increase in the greatest and least stationary equilibrium aggregates (E19) |
| Changes in the Markov processes governing stochastic shocks (C22) | Increase in the greatest and least stationary equilibrium aggregates (E19) |
| Mean-preserving spreads in the noise processes (C58) | Higher equilibrium aggregates (D50) |