Can a Representative-Agent Model Represent a Heterogeneous-Agent Economy
Sungbae An, Yongsung Chang and Sun-Bin Kim
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| Article Citation |
An, Sungbae, Yongsung Chang, and Sun-Bin Kim. 2009. "Can a Representative-Agent Model Represent a Heterogeneous-Agent Economy." American Economic Journal: Macroeconomics, 1(2): 29–54.
DOI:10.1257/mac.1.2.29
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| Abstract |
Accounting for observed fluctuations in aggregate employment, consumption,
and real wage using the optimality conditions of a representative
household requires preferences that are incompatible with
economic priors. In order to reconcile theory with data, we construct
a model with heterogeneous agents whose decisions are difficult to
aggregate because of incomplete capital markets and the indivisible
nature of labor supply. If we were to explain the model-generated
aggregate time series using decisions of a stand-in household, such
a household must have a nonconcave or unstable utility as is often
found with the aggregate US data. (JEL E13, E24)
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| Authors |
An, Sungbae (Singapore Management U)
Chang, Yongsung (U Rochester and Yonsei U)
Kim, Sun-Bin (Korea U)
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| JEL Classifications |
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E13: General Aggregative Models: Neoclassical
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