Heterogeneous Households: Monopolistic Capitalists, Entrepreneurs and Employees
What are the implications of an uneven distribution of welfare on optimal stabilisation policy? I build a dynamic stochastic general equilibrium model with household heterogeneity in income and consumption with which to solve optimal fiscal and monetary policy over the business cycle. I include three types of household; capitalists, entrepreneurs and workers, and endogenise the selection process between the latter two.
Keywordslimited asset market participation stabilisation policy income inequality business cycles
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