On a Unique Nondegenerate Distribution of Agents in the Huggett Model

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.