Rational inattention and the dynamics of consumption and wealth in general equilibrium

• 成果类型: Article
• 署名作者: Luo, Yulei; Nie, Jun; Wang, Gaowang; Young, Eric R.
• 署名单位: University of Hong Kong; Federal Reserve System - USA; Federal Reserve Bank - Kansas City; Shandong University; University of Virginia; Zhejiang University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2017.08.005
• 发表日期: 2017
• 页码: 55-87
• 关键词: rational inattention; general equilibrium; Consumption and wealth dispersion

摘要

We propose a recursive utility version of a basic Huggett (1993) model to study the implications of rational inattention (or RI, Sims, 2003, 2010) for the cross-sectional dispersion of consumption and wealth (relative to income) in general equilibrium. We find that incorporating RI can significantly improve the model's predictions in both dimensions in general equilibrium. In addition, we find that intertemporal substitution plays an important role in determining the two key dispersion moments via affecting the degree of optimal attention in equilibrium. Finally, we show that alternative models that rely on habit formation, incomplete information about current income, or borrowing constraints are not consistent with the facts we document. (C) 2017 Elsevier Inc. All rights reserved.