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Keywords:Immiseration 

Working Paper
Individual and Aggregate Constrained Efficient Intertemporal Wedges in Dynamic Mirrleesian Economies

Assuming a neoclassical production technology, this paper characterizes constrained efficient intertemporal wedges for the macro aggregate as well as the micro individual allocation of dynamic Mirrleesian economies. We first construct ?Pareto-Negishi weights? from the multipliers on a sequence of temporary incentive constraints. For a fairly general stochastic process of idiosyncratic productivity shocks, we show that the evolution of the Pareto-Negishi weight associated with agents? consumption is a nonnegative martingale. This powerful property enables us to deliver three contributions to ...
Working Papers , Paper 2015-43

Working Paper
Enduring Relationships in an Economy with Capital and Private Information

We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in models with private information about endowments. In contrast to the latter, the value of the risk-sharing arrangement in our model always remains above the autarky value. There is no need for ...
Working Papers , Paper 2020-034

Working Paper
Enduring Relationships in an Economy with Capital and Private Information

We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in private-information endowment models. In contrast to the endowment model, the value of the risk-sharing arrangement in our model always remains above autarky value, so there is no need for ...
Working Papers , Paper 2020-034

Working Paper
Insurance and Inequality with Persistent Private Information

This paper studies the optimal tradeoff between insurance and inequality in economies with persistent private information.We consider a principal-agent model in which the principal insures the agent against privately-observed shocks to his endowment, which follows an ergodic finite-state Markov chain that may exhibit arbitrary serial correlation. The optimal contract always induces immiseration: the agent’s consumption and utility become arbitrarily negative in the long run. When the endowment is positively serially correlated, the optimal contract provides increasingly high-powered ...
Working Papers , Paper 2018-020

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