In this paper we develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government’s and individual agent’s optimization problems: 1) the first order...

In this paper we develop a new general methodology for computing the optimal, welfare maximizing social planner's policies for economies with heterogeneous agents in which the stationary distribution of agents is a part of the optimization problem. Previous models analyzing the effects of...

In this paper we develop a general methodology for solving models with heterogeneous agents by projection methods. Our approach is solely based on the functional forms of agents’ optimal policy rules and on a functional condition on the endogenous stationary distribution. Solving...

We develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government's and individual agent's optimization problems: 1) the first order conditions; 2) the...

This paper provides a general methodology for introducing capital accumulation into economies with private information and heterogeneous agents. The agents operate a stochastic neoclassical production technology with capital and labor input. I study a moral hazard economy with unobservable input...

The welfare gains from the elimination of social security seem to more than compensate the agents for the lost insurance against life-span and earnings risks.

This paper studies the effects of financial intermediation on aggregate levels and the distribution of resources in an economy with wealth-constrained heterogeneous agents and occupational choice. Whether an agent becomes an entrepreneur depends on a realized entrepreneurial ability and...

This paper describes a classroom experiment demnstrating the price mechanism and the clearing of the markets in an endowment economy. Participants receive random endowments of two goods they may trade in order to maximize a given utility function. A market-clearing price is reached when no...

This paper studies the effects of a fully funded social security reform with endogenous fertility in a detailed, general equilibrium life-cycle model with dynasties whose members differ in skills and life uncertainty. We find that as high skill households tend to save relatively more in assets...