Incomplete markets, labor supply and capital accumulation
Marcet, Albert (Universitat Pompeu Fabra)
Obiols Homs, Francesc (Instituto Tecnológico Autónomo de México)
Weil, Philippe (Université Libre de Bruxelles)

Publicació:	Barcelona: CREA-Barcelona Economics Working Papers; 2003
Resum:	We explore the accumulation of capital in the presence of limited insurance against idiosyncratic shocks, borrowing constraints and endogenous labor supply. In the exogenous labor supply case (e. g. Aiyagari 1994, Huggett 1997), the presence of limited insurance increases the demand for savings for precautionary reasons. As a consequence, capital and output are higher under incomplete markets. We show that if labor hours are endogenous, labor supply is likely to be lower under incomplete markets, because those agents who experience a high shock to productivity are ex post richer and they work fewer hours. In some cases, this wealth effect can overcome the "aggregate precautionary savings" and give rise to lower savings and output under incomplete markets.
Ajuts:	European Commission ERBFMBICT 961835
Nota:	Altres ajuts: CREI, DGES (Spanish Ministery of Science and Technology) and DURSI (Generalitat de Catalunya)
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Llengua:	Anglès
Col·lecció:	CREA working paper; 173
Document:	Working paper ; recerca ; Versió publicada
Matèria:	Idiosyncratic shocks ; Incomplete markets ; Labor supply
Publicat a:	CREA Barcelona Economics Working Papers, 2009

Adreça alternativa: https://bse.eu/research/working-papers/incomplete-markets-labor-supply-and-capital-accumulation

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