Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099724 | Journal of Economic Dynamics and Control | 2006 | 24 Pages |
Abstract
This paper analyzes a general-equilibrium model of a heterogeneous agents economy in which the agents are subject to borrowing constraints and uninsurable idiosyncratic production risk. In particular, it addresses the impact of these frictions for aggregate capital accumulation. In contrast to other studies, the results suggest that, when entrepreneurs are poorly diversified, the underaccumulation of capital in the entrepreneurial sector of the model economy is less likely to hold, because of a strong precautionary savings motive. Furthermore, the effect of these frictions on entrepreneurial investment exacerbates the overaccumulation of capital in the non-entrepreneurial sector of the economy.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Francisco Covas,