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Distributional Comparative Statics

Martin Jensen ()

No 15/14, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: Distributional comparative statics is the study of how individual decisions and equilibrium outcomes vary with changes in the distribution of economic parameters (income, wealth, productivity, distortions, information, etc.). This paper develops tools to address such issues. Central to the developments is a new condition called quasi-concave differences which implies concavity of the policy function in optimization problems. The results are used to show how Bayesian equilibria respond to increased individual uncertainty (less precise private signals); and to derive conditions for concavity of policy functions in general stochastic dynamic programming problems. The latter generalizes Carroll and Kimball (1996) to models with borrowing constraints in the spirit of Aiyagari (1994).

Keywords: Distributional comparative statics; concave policy functions; income distribution; inequality; uncertainty; Bayesian games; dynamic stochastic general equilibrium models; arg max correspondence. (search for similar items in EconPapers)
JEL-codes: C61 D80 D90 E20 I30 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-mac and nep-ore
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Journal Article: Distributional Comparative Statics (2018) Downloads
Working Paper: Distributional Comparative Statics (2012) Downloads
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