Erschienen in:Banco de Espana Working Paper ; No. 1533
Umfang:
1 Online-Ressource (44 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.2693542
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 20, 2015 erstellt
Beschreibung:
This paper analyzes the problem of a benevolent planner wishing to control a population of heterogeneous agents subject to idiosyncratic shocks. This is equivalent to a deterministic control problem in which the state variable is the cross-sectional distribution. We show how, in continuous time, this problem can be broken down into a dynamic programming equation plus the law of motion of the distribution, and we introduce a new numerical algorithm to solve it. As an application, we analyze the constrained-efficient allocation of an Aiyagari economy with a fat-tailed wealth distribution. We find that the constrained-efficient allocation features more wealth inequality than the competitive equilibrium