Integrated Aggregation in Dynamic Economies

Laura Marsiliani and Thomas Renstroem
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Laura Marsiliani: Durham Business School
Thomas Renstroem: Durham Business School

No 2009_04, Department of Economics Working Papers from Durham University, Department of Economics

Abstract: The paper provides necessary and sufficient conditions for aggregation of heterogeneous individuals in dynamic economies, when individuals differ in abilities as well as in capital endowments, and when there are distortionary taxes. The aggregation theorems imply that the competitive equilibrium can be represented as if there was only one individual in the economy. This considerably facilitates analysis of the aggregate economy, such as stability analysis, as well as of the distribution of wealth. Furthermore, the paper provides conditions under which a representative individual coincides with one of the individuals in the economy.

Keywords: Aggregation; economic dynamics; heterogeneity (search for similar items in EconPapers)
JEL-codes: D30 D91 E21 (search for similar items in EconPapers)
Date: 2009-12-01
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