Nuño, Galo and Moll, Benjamin 
ORCID: 0009-0003-6067-359X
(2018)
Social optima in economies with heterogeneous agents.
Review of Economic Dynamics, 28.
150 - 180.
ISSN 1094-2025
Abstract
This paper analyzes the problem of computing the social optimum in models with heterogeneous agents subject to idiosyncratic shocks. This is equivalent to a deterministic optimal control problem in which the state variable is the infinite-dimensional cross-sectional distribution. We show how, in continuous time, the problem can be broken down into two finite-dimensional partial differential equations: a dynamic programming equation and the law of motion of the distribution, and we introduce a new numerical algorithm to solve it. We illustrate this methodology with two examples: social optima in an Aiyagari economy with stochastic lifetimes and in a model of on-the-job search with learning.
| Item Type: | Article |
|---|---|
| Official URL: | https://www.sciencedirect.com/journal/review-of-ec... |
| Additional Information: | © 2017 Elsevier Inc |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 06 Nov 2019 14:03 |
| Last Modified: | 01 Oct 2024 03:47 |
| URI: | http://eprints.lse.ac.uk/id/eprint/102399 |
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