Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks - Sciences Po Access content directly
Journal Articles International Economic Review Year : 2022

Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks

Abstract

We present a truncation theory of idiosyncratic histories for heterogeneous-agent models. This method allows us to solve for optimal Ramsey policies in such models with aggregate shocks. The method can be applied to a large variety of settings, with occasionally binding credit constraints. We use this theory to characterize the optimal level of unemployment insurance over the business cycle in a production economy. We find that the optimal policy is countercyclical.
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Dates and versions

hal-03501381 , version 1 (30-12-2021)

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Attribution - NonCommercial - NoDerivatives

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François Le Grand, Xavier Ragot. Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks. International Economic Review, 2022, 63 (1), pp.511-540. ⟨10.1111/iere.12537⟩. ⟨hal-03501381⟩
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