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Full-Text Articles in Economics
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Cowles Foundation Discussion Papers
This paper compares partial and general equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Altruistic parents make inter vivos transfers to their children. Labor supply during college, government grants and loans, as well as private loans, complement parental transfers as sources of funding for college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by two percentage points in the long-run. Any further relaxation of government-sponsored loan limits would …
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Cowles Foundation Discussion Papers
This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life cycle model with education, labor supply, and consumption/saving decisions. Cognitive and non-cognitive skills of children depend on the cognitive skills and education of parents, and affect education choice and labor market outcomes. Driven by both altruism and paternalism, parents make transfers to their children which can be used to fund education, supplementing grants, loans and the labor supply of the children themselves during college. The crowding out of parental transfers by government programs is sizable and thus cannot …
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Cowles Foundation Discussion Papers
This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Driven by both altruism and paternalism, parents make inter vivos transfers to their children. Both cognitive and non-cognitive skills determine the non-pecuniary cost of schooling. Labor supply during college, government grants and loans, as well as private loans, complement parental resources as means of funding college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by 4-5 …
The Virtues And Vices Of Equilibrium And The Future Of Financial Economics, J. Doyne Farmer, John Geanakoplos
The Virtues And Vices Of Equilibrium And The Future Of Financial Economics, J. Doyne Farmer, John Geanakoplos
Cowles Foundation Discussion Papers
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then we present a critique and describe why this approach is inherently limited, and why economics needs to move in new directions if it is to continue to make progress. We stress that this shouldn’t be a question of dogma, but should be resolved empirically. There are situations where equilibrium models provide useful predictions and …
Natural Concepts In Macroeconomics, Ray C. Fair
Natural Concepts In Macroeconomics, Ray C. Fair
Cowles Foundation Discussion Papers
Ragnar Frisch proposed in 1936 a procedure for estimating natural variable values by modifying what are now called structural macroeconometric models. This paper shows that Frisch’s procedure can be used to illuminate natural concepts using today’s models. The procedure also forces one to be precise regarding the assumptions used in moving from a short-run model to a medium-run or long-run model.
The Harmonic Fisher Equation And The Inflationary Bias Of Real Uncertainty, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos
The Harmonic Fisher Equation And The Inflationary Bias Of Real Uncertainty, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos
Cowles Foundation Discussion Papers
The classical Fisher equation asserts that in a nonstochastic economy, the inflation rate must equal the difference between the nominal and real interest rates. We extend this equation to a representative agent economy with real uncertainty in which the central bank sets the nominal rate of interest. The Fisher equation still holds, but with the rate of inflation replaced by the harmonic mean of the growth rate of money. Except for logarithmic utility, we show that on almost every path the long-run rate of inflation is strictly higher than it would be in the nonstochastic world obtained by replacing output …
Inflationary Bias In A Simple Stochastic Economy, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos
Inflationary Bias In A Simple Stochastic Economy, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos
Cowles Foundation Discussion Papers
We construct explicit equilibria for strategic market games used to model an economy with fiat money, one nondurable commodity, countably many time- periods, and a continuum of agents. The total production of the commodity is a random variable that fluctuates from period to period. In each period, the agents receive equal endowments of the commodity, and sell them for cash in a market; their spending determines, endogenously, the price of the commodity. All agents have a common utility function, and seek to maximize their expected total discounted utility from consumption. Suppose an outside bank sets an interest rate rho for …
Nash And Walras Equilibrium Via Brouwer, John Geanakoplos
Nash And Walras Equilibrium Via Brouwer, John Geanakoplos
Cowles Foundation Discussion Papers
The existence of Nash and Walras equilibrium is proved via Brouwer’s Fixed Point Theorem, without recourse to Kakutani’s Fixed Point Theorem for correspondences. The domain of the Walras fixed point map is confined to the price simplex, even when there is production and weakly quasi-convex preferences. The key idea is to replace optimization with “satisficing improvement,” i.e., to replace the Maximum Principle with the “Satisficing Principle.”
Nash And Walras Equilibrium Via Brouwer, John Geanakoplos
Nash And Walras Equilibrium Via Brouwer, John Geanakoplos
Cowles Foundation Discussion Papers
The existence of Nash and Walras equilibrium is proved via Brouwer’s Fixed Point Theorem, without recourse to Kakutani’s Fixed Point Theorem for correspondences. The domain of the Walras fixed point map is confined to the price simplex, even when there is production and weakly quasi-convex preferences. The key idea is to replace optimization with “satisficing improvement,” i.e., to replace the Maximum Principle with the “Satisficing Principle.”
Comparative Statics And Local Indeterminacy In Olg Economies: An Application Of The Multiplicative Ergodic Theorem, John Geanakoplos, Donald J. Brown
Comparative Statics And Local Indeterminacy In Olg Economies: An Application Of The Multiplicative Ergodic Theorem, John Geanakoplos, Donald J. Brown
Cowles Foundation Discussion Papers
This study is an effort to give a simple measure of the local size of the equilibrium set of OLG economies in which there may be more than one good and more than one consumer per period, and in which the generations may differ across time.