On the efficiency properties of the Roy?s model under asymmetric information

Concetta Mendolicchio and Tito Pietra

No 3606311, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: We consider Roy?s economies with perfectly competitive labor markets and asymmetric information. Firms choose their investments in physical capital before observing the characteristics of the labor markets they will face. We provide conditions under which equilibrium allocations are constrained Pareto efficient, i.e., such that it is impossible to improve upon the equilibrium allocation by changing agents? investments and letting the other endogenous variables adjust to restore market clearing. We also provide a robust example of a class of economies where these conditions fail and where equilibria are characterized by overinvestments in high skills. The results can contribute indirectly to the literatureon optimal taxation in Roy?s models.

Keywords: Roy?s model; human capital; constrained Pareto efficiency (search for similar items in EconPapers)
JEL-codes: D60 D82 J24 (search for similar items in EconPapers)
Pages: 1 page
Date: 2016-05
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Published in Proceedings of the Proceedings of the 23rd International Academic Conference, Venice, May 2016, pages 355-355

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https://iises.net/proceedings/23rd-international-a ... =36&iid=069&rid=6311 First version, 2016

Related works:
Working Paper: On the efficiency properties of the Roy's model under asymmetric information (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:3606311

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