Limits to redistribution and intertemporal wedges: implications of Pareto optimality with private information

Borys Grochulski

Economic Quarterly, 2008, vol. 94, issue Spr, 173-196

Abstract: Numerous recent studies on macroeconomic policy--including monetary policy and tax policy--have incorporated private information in their models of the economy. In such models, characterization of Pareto-optimal allocations is an important step of analysis. In this article, we study Pareto optima in a simple model economy with heterogeneous agents. We characterize and compare all Pareto-optimal allocations both with and without private information. We also demonstrate the limits to redistribution and intertemporal distortions that arise as implications of Pareto optimality with private information.

Keywords: Macroeconomics; Monetary policy (search for similar items in EconPapers)
Date: 2008
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