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Distributional Comparative Statics

Jensen, Martin Kaae

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Abstract

Distributional comparative statics is the study of how individual decisions and equilibrium outcomes vary with changes in the distribution of economic parameters (income, wealth, productivity, information, etc.). This article develops new tools to address such issues and illustrates their usefulness in applications. The central development is a condition called quasi-concave differences, which implies concavity of the policy function in optimization problems without imposing differentiability or quasi-concavity conditions. The general take-away is that many distributional questions in economics which cannot be solved by direct calculations or the implicit function theorem, can be addressed easily with this article’s methods. Several applications demonstrate this: the article shows how increased uncertainty affects the set of equilibria in Bayesian games; it shows how increased dispersion of productivities affects output in the model of Melitz (2003); and it generalizes Carroll and Kimball (1996)’s result on concave consumption functions to the Aiyagari (1994) setting with borrowing constraints.

Citation

Jensen, M. K. (2018). Distributional Comparative Statics. Review of Economic Studies, 85(1), 581-610. https://doi.org/10.1093/restud/rdx021

Journal Article Type Article
Acceptance Date May 1, 2017
Online Publication Date May 17, 2017
Publication Date Jan 1, 2018
Deposit Date Jun 22, 2020
Publicly Available Date Jun 22, 2020
Journal Review of Economic Studies
Print ISSN 0034-6527
Electronic ISSN 1467-937X
Publisher Oxford University Press
Peer Reviewed Peer Reviewed
Volume 85
Issue 1
Pages 581-610
DOI https://doi.org/10.1093/restud/rdx021
Public URL https://nottingham-repository.worktribe.com/output/4701062
Publisher URL https://academic.oup.com/restud/article-abstract/85/1/581/3829690?redirectedFrom=fulltext

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