This paper discusses a two-sector neoclassical overlapping generationseconomy with intermediate and final goods in the spirit of Romer(1990). The risk averse agents engage in one of two alternative occupations:either firm-ownership in the intermediate goods sector, characterizedby monopolistic...

We show that both real indeterminacy and asset price bubble may appear in an infinite-horizon exchange economy with infinitely lived agents and an imperfect financial market. We clarify how the asset structure and heterogeneity (in terms of preferences and endowments) affect the existence and...

The effect of incomplete information on the term structure of interest rates is examined in the framework of a pure exchange economy under uncertainty. When the growth rate of the aggregate endowment is known, the term structure is flat and deterministic. When agents do not observe the...

This paper is concerned with occupational choice under risk, where agents care about their social status. It is motivated by recent developments in the 'New Economy', which indicate that status preferences possibly provide an explanation for the observed shift towards entrepreneurial...

This paper investigates the efficiency of household investment decisions in a unique dataset containing the disaggregated wealth and income of the entire population of Sweden. The analysis focuses on two main sources of inefficiency in the financial portfolio: underdiversification of risky...

This paper discusses a two–sector neoclassical overlapping generations economy with intermediate and final goods in the spirit of Romer (1990). The risk averse agents engage in one of two alternative occupations: either firm-ownership in the intermediate goods sector, characterized by...

Despite being a mainstay of modern economic theory, the simple concept of arbitrage is sorely misused. In this paper we overview such instances, and offer an alternative definition. Most applications of arbitrage use it as a general equilibrating tendency irrespective of whether the outcome is...

We build a dynamic general equilibrium model with heterogeneous producers and financial frictions (collateral constraints and incompleteness). First, we provide a characterization to check whether a sequence is an equilibrium or not. Second, we study the effects of financial imperfections on...

In a simple infinite-horizon exchange economy with a single consumption good and a financial asset, real indeterminacy and asset price bubble may arise. We show how heterogeneity (in terms of preferences, endowments) and short-sale constraints affect the emergence and the dynamics of asset price...

The paper introduces dividend taxation and productive government spending in an infinite-horizon general equilibrium model with heterogeneous agents and financial market imperfections. We point out that imposing a dividend tax and using the revenue from this tax to finance productive government...