Optimal savings distortions with recursive preferences

• 成果类型: Article
• 署名作者: Farhi, Emmanuel; Werning, Ivan
• 署名单位: Harvard University; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2007.12.002
• 发表日期: 2008
• 页码: 21-42
• 关键词: optimal savings

摘要

This paper derives an intertemporal optimality condition for economies with private information, focusing on a class of recursive preferences. By comparing it to the situation where agents can freely save in a risk-free asset market, we derive the optimal savings distortions necessary for constrained optimality. Our recursive preferences are homogeneous and satisfy a balanced-growth condition, while allowing us to separate the role of risk aversion and intertemporal elasticity of substitution. We perform some quantitative exercises that disentangle the respective roles played by these two parameters in optimal distortions and the implied welfare gains. (C) 2008 Elsevier B.V. All rights reserved.