Controlling a distribution of heterogeneous agents

Galo Nuño Barrau and Benjamin Moll

No 1533, Working Papers from Banco de España

Abstract: 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 fi nd that the constrained-efficient allocation features more wealth inequality than the competitive equilibrium.

Keywords: Kolmogorov forward equation; wealth distribution; social welfare function; mean field control (search for similar items in EconPapers)
JEL-codes: C6 D3 D5 E2 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2015-11
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1533

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