Publication Type
Working Paper
Version
publishedVersion
Publication Date
11-2008
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.
Discipline
Macroeconomics
Research Areas
Macroeconomics
Volume
14-2008
First Page
1
Last Page
45
Identifier
10.1257/mac.1.2.29
Publisher
SMU Economics and Statistics Working Paper Series, No. 14-2008
City or Country
Singapore
Citation
AN, Sungbae; CHANG, Yongsung; and KIM, Sun-Bin.
Can a Representative Agent Model Represent a Heterogeneous Agent Economy?. (2008). 14-2008, 1-45.
Available at: https://ink.library.smu.edu.sg/soe_research/543
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Published in American Economic Journal: Macroeconomics, 2009, https://doi.org/10.1257/mac.1.2.29