scholarly journals Can a Representative-Agent Model Represent a Heterogeneous-Agent Economy

2009 ◽  
Vol 1 (2) ◽  
pp. 29-54 ◽  
Author(s):  
Sungbae An ◽  
Yongsung Chang ◽  
Sun-Bin Kim
Keyword(s):  
Time Series ◽  
Labor Supply ◽  
Optimality Conditions ◽  
Capital Markets ◽  
Real Wage ◽  
Heterogeneous Agents ◽  
Representative Agent ◽  
Heterogeneous Agent ◽  
Agent Model ◽  
Representative Agent Model

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)

Heterogeneous utility from a representative agent model: immigrants vs non-immigrants

2019 ◽  
Vol 46 (7) ◽  
pp. 1309-1318
Author(s):  
Kerk L. Phillips
Keyword(s):  
Steady State ◽  
Euler Equations ◽  
Design Methodology ◽  
Representative Agent ◽  
Heterogeneous Agent ◽  
Content Type ◽  
Agent Model ◽  
Dynamic General Equilibrium Model ◽  
Computational Resources ◽  
Representative Agent Model

Purpose The purpose of this paper is to infer the welfare of heterogeneous agents using a representative agent model. Design/methodology/approach It does so by partitioning the household into subunits and allocating consumption to each subunit proportionally to the income the subunit generates through wages and capital returns. Findings The author shows that for a simple dynamic general equilibrium model with immigration, the steady state utilities of these subunits correspond very closely to the utilities for an equivalent heterogeneous agent model. This is particularly true when labor–leisure decisions are made using slightly modified Euler equations. Originality/value More complicated models can be solved and simulated using fewer computational resources using this technique.

scholarly journals GENERAL EQUILIBRIUM FEEDBACK REGARDING THE EMPLOYMENT EFFECTS OF LABOR TAXES

2019 ◽  
Vol 24 (8) ◽  
pp. 2012-2032
Author(s):  
Minchul Yum
Keyword(s):  
Interest Rate ◽  
General Equilibrium ◽  
Labor Supply ◽  
Real Interest Rate ◽  
Heterogeneous Agent ◽  
Agent Model ◽  
Heterogeneous Agent Model ◽  
Labor Tax ◽  
Labor Taxes ◽  
Tax Changes

A higher labor tax rate increases the equilibrium real interest rate and reduces the equilibrium wage in a heterogeneous-agent model with endogenous savings and indivisible labor supply decisions. I show that these general equilibrium (GE) adjustments, in particular of the real interest rate, reinforce the negative employment impact of higher labor taxes. However, the representative-agent version of the model, which generates similar aggregate employment responses to labor tax changes, implies that GE feedback is neutral. The cross-country panel data reveal that the negative association between labor tax rates and the extensive margin labor supply is significantly and robustly weaker in small open economies where the interest rate is less tightly linked to domestic circumstances. This empirical evidence supports the transmission mechanism of labor tax changes for employment in the heterogeneous-agent model.

The Representative Agent Model

2020 ◽  
pp. 3-28
Author(s):  
Fernando de Holanda Barbosa ◽  
Luiz Antônio de Lima Junior
Keyword(s):  
Representative Agent ◽  
Agent Model ◽  
Representative Agent Model

GARP, SEPARABILITY, AND THE REPRESENTATIVE AGENT

2000 ◽  
Vol 4 (3) ◽  
pp. 324-342 ◽  
Author(s):  
Adrian R. Fleissig ◽  
Alastair R. Hall ◽  
John J. Seater
Keyword(s):  
Full Time ◽  
Representative Agent ◽  
Agent Model ◽  
Aggregate Consumption ◽  
Consumption Data ◽  
Time Periods ◽  
Separable Utility ◽  
Made In ◽  
Representative Agent Model

We examine whether annual, quarterly, and monthly U.S. aggregate consumption data could have been generated by a utility-maximizing representative agent with intertemporally separable utility. The model appears inapplicable over the full time periods covered by the NIPA data, which are the sample periods often used in the literature. The model does appear applicable, however, over long subsamples. The data also are inconsistent with separability assumptions routinely made in the literature. In particular, the main categories of consumption (nondurables, services, and durables) are not mutually separable. We consider the implications of our results for inference about consumption based on the representative-agent model.

The Value of Information in Efficient Risk-Sharing Arrangements

2001 ◽  
Vol 91 (3) ◽  
pp. 509-524 ◽  
Author(s):  
Edward E Schlee
Keyword(s):  
Risk Sharing ◽  
Value Of Information ◽  
Welfare Effects ◽  
Competitive Markets ◽  
Representative Agent ◽  
Agent Model ◽  
Pure Exchange ◽  
Representative Agent Model

Suppose that agents share risks in competitive markets. We show that better information makes everyone worse off if the economy has a representative agent—that is, the economy's demand for state-contingent consumption equals the demand of a hypothetical agent who owns all the economy's wealth. The representative agent, moreover, is normatively unrepresentative: although each agent dislikes information, the “representative” agent is indifferent. Although we emphasize pure exchange, our results imply that a representative-agent model might seriously misstate the welfare effects of improved information in an economy with production and risk sharing, even if it performs well otherwise. (JEL D8)

REAL WAGE RIGIDITY, HETEROGENEITY, AND THE BUSINESS CYCLES

2019 ◽  
pp. 1-25
Author(s):  
Eunseong Ma
Keyword(s):  
Real Wage ◽  
Marginal Rate ◽  
Heterogeneous Agent ◽  
Agent Model ◽  
Aggregate Consumption ◽  
Wage Stickiness ◽  
Marginal Rate Of Substitution ◽  
Labor Wedge ◽  
The Business Cycle ◽  
Real Wage Rigidity

This paper investigates the quantitative implications of real wage rigidities and heterogeneity for two long-lasting puzzles in the business cycle literature: the low correlation between total hours worked and labor productivity and the large volatility of the labor wedge, defined as a gap between the marginal rate of substitution of aggregate leisure for aggregate consumption and the marginal product of aggregate labor. I shed light on these issues by extending a heterogeneous-agent model with an indivisible labor supply choice to real wage rigidities. I find that a small amount of real wage stickiness would be sufficient to resolve both anomalies when long-term wage contracts and heterogeneity are taken into account.

The Representative Agent Model

2018 ◽  
pp. 3-32
Author(s):  
Fernando de Holanda Barbosa
Keyword(s):  
Representative Agent ◽  
Agent Model ◽  
Representative Agent Model
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