Creator: Aiyagari, S. Rao and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 226 Abstract:
This note presents a model whose competitive equilibrium can be consistent with the observation that current labor market conditions affect the well-being of new entrants more than they do that of senior workers. The model uses the notion that new entrants are not around soon enough to participate in risk-sharing contingent on the shocks that determine the equilibrium marginal products of first-period employment. This timing notion is formalized using a stochastic overlapping generations model.
A version of this paper was presented at the Econometric Society Summer Meeting, Cornell University, June 16-19, 1982.
Fach: J21 - Labor Force and Employment, Size, and Structure and E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Creator: Aiyagari, S. Rao Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 376 Abstract:
We describe a simple environment in which assets of varying qualities may be used for transactions and consumption. The quality of an asset is known to the seller but not the buyer. We show that this feature can generate a negative relationship between the transactions velocities of assets and their rates of return. We also discuss several versions of Gresham's Law which hold in this environment.
Stichwort: Consumption, Asset quality, Transactions, and Gresham's Law Fach: E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Creator: Aiyagari, S. Rao Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 328 Abstract:
One purpose of this article is to exposit the relationship between life cycle models (with constructive immortality) and infinitely lived agents models. We use this to point out problems in interpreting data, especially with regard to the use of interest rates in the class of representative agent models when growth in population and per capita variables is taken into account. We also point out some common misconceptions regarding the "volume of trade" in representative agent models and show how to reconcile the savings profile of the representative agent with the life cycle savings profile in a life cycle model.
Stichwort: Calibration, Bequests, Infinitely lived agents, Representative agent models, and Volume of trade Fach: D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
Creator: Aiyagari, S. Rao Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 319 Abstract:
We consider the existence of deterministically cycling steady state equilibria in a class of stationary overlapping generations models with sufficiently long (but, finite) lived agents. Preferences are of the discounted sum of utilities type with a fixed discount rate. Utility functions with large coefficients of relative risk aversion which generate strong income effects (relative to substitution effects) and backward bending offer curves are permitted. Lifetime endowment patterns are quite arbitrary. We show that if agents have a positive discount rate, then as agents1 lifespans get large, short period non-monetary cycles will disappear. Further, constant monetary steady states do not exist and therefore, neither do stationary monetary cycles of any period. We then consider the case where agents have a negative discount rate and show that there are robust examples in which constant monetary steady states as well as stationary monetary cycles (with undiminished amplitude) can occur no matter how long agents live.
Stichwort: Longevity, Business cycles, Intertemporal choice, and Monetary theory Fach: D91 - Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making and N10 - Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative
Creator: Aiyagari, S. Rao Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 424 Stichwort: Deficit, Tax policy, Federal government, Taxation, Tax, Tax rates, Taxes , and Budget management Fach: H21 - Taxation and Subsidies: Efficiency; Optimal Taxation and H62 - National Deficit; Surplus
Creator: Aiyagari, S. Rao and Peled, Dan Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 503 Abstract:
It is often argued that with a positively skewed income distribution (median less than mean) a majority voting over proportional tax rates would result in higher tax rates than those that maximize average welfare, and will accordingly reduce aggregate savings. We reexamine this view in a capital accumulation model, in which distorting redistributive taxes provide insurance against idiosyncratic shocks, and income distributions evolve endogenously. We find small differences of either sign between the tax rates set by a majority voting and a utilitarian government, for reasonable parametric specifications. We show how these differences reflect a greater responsiveness of a utilitarian government to the average need for the insurance provided by the tax-redistribution scheme. These conclusions remain true despite the fact that the model simulations produce positively skewed distributions of total income across agents.
Stichwort: Votes, Taxes, and Income distribution Fach: E62 - Fiscal Policy and D72 - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior