Asset Market Structure and Growth

Peghe (Chrissopighi) Braila and Alessandro Turrini ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: In this paper we illustrate the possible normative relevance of the links between human capital and financial assets via an example related to growth. Human capital investments occur in a risky environment, in that they are subject to aggregate uncertainty. Agents are heterogenous in their income streams, and this generates different risk attitudes and the scope for trading in financial assets. In this environment, human capital is a non-marketable asset that interacts with the existing financial structure in transferring wealth over time.When the financial structure is complete, growth is indeterminate because individual allocations between human capital and a tradable asset are indeterminate. When the financial structure is incomplete, the growth rate depends on the payoff structure of the assets. An issue of optimality for the structure of asset returns is raised.

Keywords: Incomplete Markets; Human Capital; Growth (search for similar items in EconPapers)
JEL-codes: D52 J24 O4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-mfd
Date: 2000-07-01
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Published in RISEC: International-Review-of-Economics-and-Business, 2002, vol. 49, pages 491-510

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Persistent link: http://EconPapers.repec.org/RePEc:sef:csefwp:45

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