Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks

François Le Grand and Xavier Ragot
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François Le Grand: EM - EMLyon Business School, ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

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Abstract: We present a truncation theory of idiosyncratic histories for heterogeneous-agent models. This method allows us to solve for optimal Ramsey policies in such models with aggregate shocks. The method can be applied to a large variety of settings, with occasionally binding credit constraints. We use this theory to characterize the optimal level of unemployment insurance over the business cycle in a production economy. We find that the optimal policy is countercyclical.

Keywords: Incomplete Markets; Optimal Policies; Heterogeneous Agent Models (search for similar items in EconPapers)
Date: 2022-02
New Economics Papers: this item is included in nep-dge
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Published in International Economic Review, 2022, 63 (1), pp.511-540. ⟨10.1111/iere.12537⟩

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Related works:
Journal Article: MANAGING INEQUALITY OVER BUSINESS CYCLES: OPTIMAL POLICIES WITH HETEROGENEOUS AGENTS AND AGGREGATE SHOCKS (2022)
Working Paper: Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (2022)
Working Paper: Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (2022)
Working Paper: Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (2020)
Working Paper: Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (2020)
Working Paper: Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (2020)
Working Paper: Managing Inequality over the Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03501381

DOI: 10.1111/iere.12537

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