Capital Accumulation in Private Information Economies

Radim Bohacek
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Radim Bohacek: CERGE-EI

The B.E. Journal of Macroeconomics, 2005, vol. topics.5, issue 1

Abstract: This paper provides a general methodology for introducing capital accumulation into economies with private information and heterogeneous agents. The agents operate a stochastic neoclassical production technology with capital and labor input. I study a moral hazard economy with unobservable input (hidden action). I characterize the efficient allocation of capital, labor, and consumption in a stationary recursive competitive equilibrium. The economy is decentralized by the component planner approach developed by Atkeson and Lucas (1995). Accumulation of capital is facilitated by a "capital planner" who serves as a financial intermediary for the component planners. In the unique, feasible and non-degenerate stationary equilibrium, private information lowers the market-clearing interest rate below agents' discount rate.

Keywords: Moral hazard; capital accumulation; optimal contracts (search for similar items in EconPapers)
JEL-codes: D82 D31 E13 D58 (search for similar items in EconPapers)
Date: 2005
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Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejmac:v:topics.5:y:2005:i:1:n:24

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