Peng, Yulei (2013-08). Dynamic Economy with Heterogeneous Agents. Doctoral Dissertation. Thesis uri icon

abstract

  • This dissertation consists of three essays about heterogeneous agents in the dynamic economy and how to deal with the asymmetric information arose by heterogeneity. Firstly, I consider the optimal taxation issue in a dynamic endogenous growth model with considering human capital accumulation, and agents ability is heterogeneous and private information. Moreover, the agents with higher ability have positive external effects on others. By using the two-sector endogenous model, I show that it is optimal to impose different income and capital income taxes on people with different abilities. Specifically, positive marginal income tax is adopted for people with lower ability while no tax is imposed for people with higher ability; marginal capital income tax is zero whatever the agent's is low or high. As for people using the capital and labor for human capital accumulation, the government should subsidize them whatever their ability is. Secondly, I study the optimal monetary and fiscal policy with heterogeneous agents based on the search-theoretical environment where money is essential and consider the private information. I first solve the households' problem in the centralized and decentralized market, and find out the optimal conditions. Then, in this section, I describe the problem that social planner faces by involving uncertainty and agents whose types are continuous. By comparing the optimal conditions in this generous setting, I show that the Friedman rule is no longer optimal when jointed with nonlinear taxation of income. Moreover, the capital income taxation is not zero. Moreover, I constructs a general theoretical model to consider two kinds of financial frictions in the economy with financial intermediaries. By quantitative analysis the model with three separate shocks which are a negative collateral shock, a negative productivity shock and a positive shock to bankers' divert rate, I find that a negative collateral shock which tightens firms' financing constraints on investment can generate an equity price boom which is different from what is observed in recessions. Therefore, the collateral shock is not the main reason for the business cycle, while the negative productivity shock and bankers' moral hazard problem are more important aspects to explain current economy.
  • This dissertation consists of three essays about heterogeneous agents in the dynamic economy and how to deal with the asymmetric information arose by heterogeneity.

    Firstly, I consider the optimal taxation issue in a dynamic endogenous growth model with considering human capital accumulation, and agents ability is heterogeneous and private information. Moreover, the agents with higher ability have positive external effects on others. By using the two-sector endogenous model, I show that it is optimal to impose different income and capital income taxes on people with different abilities. Specifically, positive marginal income tax is adopted for people with lower ability while no tax is imposed for people with higher ability; marginal capital income tax is zero whatever the agent's is low or high. As for people using the capital and labor for human capital accumulation, the government should subsidize them whatever their ability is.
    Secondly, I study the optimal monetary and fiscal policy with heterogeneous agents based on the search-theoretical environment where money is essential and consider the private information. I first solve the households' problem in the centralized and decentralized market, and find out the optimal conditions. Then, in this section, I describe the problem that social planner faces by involving uncertainty and agents whose types are continuous. By comparing the optimal conditions in this generous setting, I show that the Friedman rule is no longer optimal when jointed with nonlinear taxation of income. Moreover, the capital income taxation is not zero.

    Moreover, I constructs a general theoretical model to consider two kinds of financial frictions in the economy with financial intermediaries. By quantitative analysis the model with three separate shocks which are a negative collateral shock, a negative productivity shock and a positive shock to bankers' divert rate, I find that a negative collateral shock which tightens firms' financing constraints on investment can generate an equity price boom which is different from what is observed in recessions. Therefore, the collateral shock is not the main reason for the business cycle, while the negative productivity shock and bankers' moral hazard problem are more important aspects to explain current economy.

publication date

  • August 2013