Incomplete markets, labor supply and capital accumulation

Albert Marcet; Francesc Obiols-Homs; Philippe Weil

doi:10.1016/j.jmoneco.2006.12.011

Incomplete markets, labor supply and capital accumulation

Albert Marcet, Francesc Obiols-Homs^*, Philippe Weil

^*Autor corresponent d’aquest treball

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Resum

Endogenous labor supply decisions are introduced in an equilibrium model of limited insurance against idiosyncratic shocks. Unlike in the standard case with exogenous labor (e.g. [Aiyagari, S.R., 1994. Uninsured idiosyncratic risk and aggregate saving. Quarterly Journal of Economics 109, 659-684; Huggett, M., 1997. The one-sector growth model with idiosyncratic shocks: steady states and dynamics. Journal of Monetary Economics 39, 385-403]), labor supply is likely to be lower than under complete markets. This is due to an ex post wealth effect on labor supply (rich productive agents work fewer hours) that runs counter the precautionary savings motive. As a result, equilibrium savings and output may be lower under incomplete markets. It is also found that long-run savings remain finite even when the interest rate equals the inverse of the discount factor. © 2007 Elsevier B.V. All rights reserved.

Idioma original	Anglès
Pàgines (de-a)	2621-2635
Nombre de pàgines	15
Revista	Journal of Monetary Economics
Volum	54
Número	8
DOIs	https://doi.org/10.1016/j.jmoneco.2006.12.011
Estat de la publicació	Publicada - 1 de nov. 2007

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10.1016/j.jmoneco.2006.12.011Llicència: C In Copyright

1 Acabat

Efectes reals de la política monetària
Caballé, J. (PI), Erosa Etchebehere, A. (Investigador/a contractat/da), Guaitoli ., D. (Investigador/a contractat/da), Raurich Puigdevall, F. X. (Investigador/a contractat/da), Rodriguez Mendizabal, H. (Investigador/a contractat/da), Jarque Ribera, X. (Investigador/a), Panadès Martí, J. (Investigador/a), Pappa , E. (Investigador/a), Petith , H. C. (Investigador/a) & Sorolla Amat, V. (Investigador/a)
Ministerio de Ciencia y Tecnología (MCYT)
10/12/03 → 19/11/06
Projecte: Projectes i Ajuts a la Recerca

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keywords = "Idiosyncratic shocks, Incomplete markets, Labor supply",

author = "Albert Marcet and Francesc Obiols-Homs and Philippe Weil",

year = "2007",

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doi = "10.1016/j.jmoneco.2006.12.011",

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TY - JOUR

T1 - Incomplete markets, labor supply and capital accumulation

AU - Marcet, Albert

AU - Obiols-Homs, Francesc

AU - Weil, Philippe

PY - 2007/11/1

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N2 - Endogenous labor supply decisions are introduced in an equilibrium model of limited insurance against idiosyncratic shocks. Unlike in the standard case with exogenous labor (e.g. [Aiyagari, S.R., 1994. Uninsured idiosyncratic risk and aggregate saving. Quarterly Journal of Economics 109, 659-684; Huggett, M., 1997. The one-sector growth model with idiosyncratic shocks: steady states and dynamics. Journal of Monetary Economics 39, 385-403]), labor supply is likely to be lower than under complete markets. This is due to an ex post wealth effect on labor supply (rich productive agents work fewer hours) that runs counter the precautionary savings motive. As a result, equilibrium savings and output may be lower under incomplete markets. It is also found that long-run savings remain finite even when the interest rate equals the inverse of the discount factor.

AB - Endogenous labor supply decisions are introduced in an equilibrium model of limited insurance against idiosyncratic shocks. Unlike in the standard case with exogenous labor (e.g. [Aiyagari, S.R., 1994. Uninsured idiosyncratic risk and aggregate saving. Quarterly Journal of Economics 109, 659-684; Huggett, M., 1997. The one-sector growth model with idiosyncratic shocks: steady states and dynamics. Journal of Monetary Economics 39, 385-403]), labor supply is likely to be lower than under complete markets. This is due to an ex post wealth effect on labor supply (rich productive agents work fewer hours) that runs counter the precautionary savings motive. As a result, equilibrium savings and output may be lower under incomplete markets. It is also found that long-run savings remain finite even when the interest rate equals the inverse of the discount factor.

KW - Idiosyncratic shocks

KW - Incomplete markets

KW - Labor supply

U2 - 10.1016/j.jmoneco.2006.12.011

DO - 10.1016/j.jmoneco.2006.12.011

M3 - Article

SN - 0304-3932

VL - 54

SP - 2621

EP - 2635

JO - Journal of Monetary Economics

JF - Journal of Monetary Economics

IS - 8

ER -

Incomplete markets, labor supply and capital accumulation

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