On stationary recursive equilibria and nondegenerate state spaces: The Huggett model

Timothy Kam and Junsang Lee

Journal of Mathematical Economics, 2014, vol. 50, issue C, 156-159

Abstract: The seminal work of Huggett (1993) showed that in a stationary recursive equilibrium, there exists a unique stationary distribution of agent types. However, the question remains open as to whether an equilibrium’s individual state space might turn out to be such that: either (i) every agent’s common borrowing constraint binds forever, and so the distribution of agents will be degenerate; or (ii) the individual state space might be unbounded. By invoking a simple comparative-statics argument, we provide closure to this open question. We show that the equilibrium individual state space must be compact and that this set has positive measure. From Huggett’s result that there is a unique distribution of agents in a stationary equilibrium, our result implies that it must also be one that is nontrivial or nondegenerate.

Keywords: Incomplete markets; Compactness; Individual state space; Stationary distribution (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S030440681300092X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:50:y:2014:i:c:p:156-159

DOI: 10.1016/j.jmateco.2013.09.009

Access Statistics for this article

Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii

More articles in Journal of Mathematical Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().