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Limits to redistribution and intertemporal wedges : implications of Pareto optimality with private information

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  • Borys Grochulski

Abstract

Numerous recent studies on macroeconomic policy--including monetary policy and tax policy--have incorporated private information in their models of the economy. In such models, characterization of Pareto-optimal allocations is an important step of analysis. In this article, we study Pareto optima in a simple model economy with heterogeneous agents. We characterize and compare all Pareto-optimal allocations both with and without private information. We also demonstrate the limits to redistribution and intertemporal distortions that arise as implications of Pareto optimality with private information.

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  • Borys Grochulski, 2008. "Limits to redistribution and intertemporal wedges : implications of Pareto optimality with private information," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 94(Spr), pages 173-196.
    • Handle: RePEc:fip:fedreq:y:2008:i:spr:p:173-196:n:v.94no.2
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    Cited by:

    1. Alan G. Isaac, 2014. "The Intergenerational Propagation of Wealth Inequality," Metroeconomica, Wiley Blackwell, vol. 65(4), pages 571-584, November.
    2. Borys Grochulski, 2009. "Distortionary taxation for efficient redistribution," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 95(Sum), pages 235-267.

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