Publication Type
Journal Article
Version
publishedVersion
Publication Date
7-2009
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
Publication
American Economic Journal: Macroeconomics
Volume
1
Issue
2
First Page
29
Last Page
54
ISSN
1945-7707
Identifier
10.1257/mac.1.2.29
Publisher
American Economic Association
Citation
AN, Sungbae; CHANG, Yongsung; and KIM, Sun-Bin.
Can a Representative-Agent Model Represent a Heterogeneous-Agent Economy. (2009). American Economic Journal: Macroeconomics. 1, (2), 29-54.
Available at: https://ink.library.smu.edu.sg/soe_research/544
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.
Additional URL
https://doi.org/10.1257/mac.1.2.29