Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099636 | Journal of Economic Dynamics and Control | 2011 | 19 Pages |
Abstract
This paper argues that the solution to a dynamic optimization problem of consumption and labor under finite information-processing capacity can simultaneously explain the intertemporal and intratemporal labor wedges. It presents a partial equilibrium model where a representative risk adverse consumer chooses information about wealth with limited attention. The paper compares ex-post realizations of models with finite and infinite capacity. The model produces macroeconomic wedges and measures of elasticity consistent with the literature. These findings suggest that aconsumption-labor model with information-processing constraints can explain the difference between predicted and observed consumption and employment behavior.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Antonella Tutino,