Portfolio autarky: a welfare analysis

John H. Kareken and Neil Wallace ()

No 9, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Portfolio autarky obtains when residents of every country are prohibited from owning real assets located in other countries. Such a regime and a laissez-faire regime, both characterized by free trade in goods, are studied in a model whose resource and technology assumptions are those of the standard two-country, two- (nonreproducible) factor, two- (nonstorable) good model. But to ensure a market for assets (land), the model is peopled by overlapping generations; each two-period lived individual supplies one unit of labor only in the first period of his life. Unique equilibria are described and shown to exist, and, in terms of a ?growth model? version of the Pareto criterion, laissez-faire is shown to be optimal and portfolio autarky to be nonoptimal.

Keywords: Welfare (search for similar items in EconPapers)
Date: 1976
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Published in Journal of International Economics (Vol. 7, No. 1, February 1977, pp. 19-43)

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