IDEAS home Printed from https://ideas.repec.org/a/wly/iecrev/v61y2020i3p1115-1138.html
   My bibliography  Save this article

Existence Of Stationary Equilibrium In An Incomplete‐Market Model With Endogenous Labor Supply

Author

Listed:
  • Shenghao Zhu

Abstract

In this article, I first study an income fluctuation problem with endogenous labor supply. Let β be the agent's time discount factor and R>0 be the constant gross rate of return on assets. For βR=1, I show that the agent's wealth either approaches infinity almost surely or converges to a finite level almost surely. For βR

Suggested Citation

  • Shenghao Zhu, 2020. "Existence Of Stationary Equilibrium In An Incomplete‐Market Model With Endogenous Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(3), pages 1115-1138, August.
    • Handle: RePEc:wly:iecrev:v:61:y:2020:i:3:p:1115-1138
    DOI: 10.1111/iere.12451
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/iere.12451
    Download Restriction: no
    File URL: https://libkey.io/10.1111/iere.12451?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Marcet, Albert & Obiols-Homs, Francesc & Weil, Philippe, 2007. "Incomplete markets, labor supply and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2621-2635, November.
    2. Klaus, Bettina & Newton, Jonathan, 2016. "Stochastic stability in assignment problems," Journal of Mathematical Economics, Elsevier, vol. 62(C), pages 62-74.
    3. Aiyagari, S. Rao & McGrattan, Ellen R., 1998. "The optimum quantity of debt," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 447-469, October.
    4. Gary Chamberlain & Charles A. Wilson, 2000. "Optimal Intertemporal Consumption Under Uncertainty," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 365-395, July.
    5. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
    6. Stachurski, John & Toda, Alexis Akira, 2019. "An impossibility theorem for wealth in heterogeneous-agent models with limited heterogeneity," Journal of Economic Theory, Elsevier, vol. 182(C), pages 1-24.
    7. Clarida, Richard H, 1987. "Consumption, Liquidity Constraints and Asset Accumulation in the Presence of Random Income Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 339-351, June.
    8. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 659-684.
    9. Benhabib, Jess & Bisin, Alberto & Zhu, Shenghao, 2015. "The wealth distribution in Bewley economies with capital income risk," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 489-515.
    10. Sun, Yeneng, 2006. "The exact law of large numbers via Fubini extension and characterization of insurable risks," Journal of Economic Theory, Elsevier, vol. 126(1), pages 31-69, January.
    11. Duncan K. Foley & Martin F. Hellwig, 1975. "Asset Management with Trading Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(3), pages 327-346.
    12. de Oliveira Sotomayor, Marilda A., 1984. "On income fluctuations and capital gains," Journal of Economic Theory, Elsevier, vol. 32(1), pages 14-35, February.
    13. Daron Acemoglu & Martin Kaae Jensen, 2015. "Robust Comparative Statics in Large Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 587-640.
    14. , & ,, 2014. "Stochastic stability in monotone economies," Theoretical Economics, Econometric Society, vol. 9(2), May.
    15. repec:hal:wpspec:info:hdl:2441/8623 is not listed on IDEAS
    16. Bar Light, 2020. "Uniqueness of equilibrium in a Bewley–Aiyagari model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(2), pages 435-450, March.
    17. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    18. Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-1406, November.
    19. repec:hal:spmain:info:hdl:2441/8623 is not listed on IDEAS
    20. Schechtman, Jack, 1976. "An income fluctuation problem," Journal of Economic Theory, Elsevier, vol. 12(2), pages 218-241, April.
    21. Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 58(2), pages 135-170, December.
    22. Haim Mendelson & Yakov Amihud, 1982. "Optimal Consumption Policy under Uncertain Income," Management Science, INFORMS, vol. 28(6), pages 683-697, June.
    23. Schechtman, Jack & Escudero, Vera L. S., 1977. "Some results on "an income fluctuation problem"," Journal of Economic Theory, Elsevier, vol. 16(2), pages 151-166, December.
    24. John Laitner, 1979. "Household Bequest Behaviour and the National Distribution of Wealth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 467-483.
    25. Rabault, Guillaume, 2002. "When do borrowing constraints bind? Some new results on the income fluctuation problem," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 217-245, February.
    26. Clarida, Richard H, 1990. "International Lending and Borrowing in a Stochastic, Stationary Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 543-558, August.
    27. Moritz Kuhn, 2013. "Recursive Equilibria In An Aiyagari‐Style Economy With Permanent Income Shocks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 807-835, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marcello D’Amato & Christian Di Pietro & Marco M. Sorge, 2024. "Left and right: a tale of two tails of the wealth distribution," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1389-1433, December.
    2. Ma, Qingyin & Stachurski, John & Toda, Alexis Akira, 2022. "Unbounded dynamic programming via the Q-transform," Journal of Mathematical Economics, Elsevier, vol. 100(C).
    3. Damián Pierri, 2023. "Simulations in Models with Heterogeneous Agents, Incomplete Markets and Aggregate Uncertainty," Working Papers 259, Red Nacional de Investigadores en Economía (RedNIE).
    4. Nakajima, Tomoyuki & Takahashi, Shuhei, 2022. "Uninsured idiosyncratic risk and the government asset Laffer curve," Journal of Macroeconomics, Elsevier, vol. 71(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Açıkgöz, Ömer T., 2018. "On the existence and uniqueness of stationary equilibrium in Bewley economies with production," Journal of Economic Theory, Elsevier, vol. 173(C), pages 18-55.
    2. Acikgoz, Omer, 2015. "On the Existence of Equilibrium in Bewley Economies with Production," MPRA Paper 69061, University Library of Munich, Germany.
    3. Acikgoz, Omer, 2015. "On the Existence and Uniqueness of Stationary Equilibrium in Bewley Economies with Production," MPRA Paper 71066, University Library of Munich, Germany, revised 30 Apr 2016.
    4. Thomas J. Sargent & John Stachurski, 2024. "Dynamic Programming: Finite States," Papers 2401.10473, arXiv.org.
    5. Ma, Qingyin & Stachurski, John & Toda, Alexis Akira, 2020. "The income fluctuation problem and the evolution of wealth," Journal of Economic Theory, Elsevier, vol. 187(C).
    6. Huggett, Mark & Ospina, Sandra, 2001. "Aggregate precautionary savings: when is the third derivative irrelevant?," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 373-396, October.
    7. Bar Light, 2020. "Uniqueness of equilibrium in a Bewley–Aiyagari model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(2), pages 435-450, March.
    8. Benhabib, Jess & Bisin, Alberto & Zhu, Shenghao, 2015. "The wealth distribution in Bewley economies with capital income risk," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 489-515.
    9. Huggett, Mark, 1997. "The one-sector growth model with idiosyncratic shocks: Steady states and dynamics," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 385-403, August.
    10. Acikgoz, Omer, 2013. "Transitional Dynamics and Long-run Optimal Taxation Under Incomplete Markets," MPRA Paper 50160, University Library of Munich, Germany.
    11. Mark Aguiar & Manuel Amador & Cristina Arellano, 2021. "Micro Risks and Pareto Improving Policies with Low Interest Rates," Staff Report 625, Federal Reserve Bank of Minneapolis.
    12. Lehrer, Ehud & Light, Bar, 2018. "The effect of interest rates on consumption in an income fluctuation problem," Journal of Economic Dynamics and Control, Elsevier, vol. 94(C), pages 63-71.
    13. Bar Light, 2018. "Precautionary Saving in a Markovian Earnings Environment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 138-147, July.
    14. Marcello D’Amato & Christian Di Pietro & Marco M. Sorge, 2024. "Left and right: a tale of two tails of the wealth distribution," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1389-1433, December.
    15. Acikgoz, Omer, 2015. "Transitional Dynamics and Long-run Optimal Taxation Under Incomplete Markets," MPRA Paper 73380, University Library of Munich, Germany.
    16. Mark Aguiar & Manuel Amador & Cristina Arellano, 2021. "Micro Risks and Pareto Improving Policies," Working Papers 2021-15, Princeton University. Economics Department..
    17. Josep Pijoan-Mas, 2006. "Precautionary Savings or Working Longer Hours?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 326-352, April.
    18. Bar Light, 2019. "General equilibrium in a heterogeneous-agent incomplete-market economy with many consumption goods and a risk-free bond," Papers 1906.06810, arXiv.org, revised Mar 2021.
    19. Daron Acemoglu & Martin Kaae Jensen, 2015. "Robust Comparative Statics in Large Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 587-640.
    20. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 12, pages 697-812, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:iecrev:v:61:y:2020:i:3:p:1115-1138. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.