Rising household debt: Its causes and macroeconomic implications--a long-period analysis

The article analyses the rise in household indebtedness fromthe point of view of its causes and long-run macroeconomic implications.The analysis is focussed on the US case. Differently from life-cycleinterpretations of the phenomenon, and from interpretationsin terms of erratic deviations of current income flows fromtheir long-run trend, the rising household debt is viewed asthe outcome of persistent changes in income distribution andgrowing income inequalities. Through household debt, low wagesappear to have been brought to coexist with relatively highlevels of aggregate demand, thus providing the solution to thecontradiction between the necessity of high and rising consumptionlevels, for the growth of the system's actual output, and aframework of antagonistic conditions of distribution which keepswithin limits the real income of the vast majority of society.The question of the long-run sustainability of this substitutionof loans for wages is finally discussed.     

Social conflict and growth

Despite the predictions of the neoclassical theory of economic growth, we observe that poor countries have invested at lower rates and have not grown faster than rich countries. To explain these empirical regularities we provide a game-theoretic model of conflict between social groups over the distribution of income. Among all possible equilibria, we concentrate on those that are on the constrained Pareto frontier. We study how the level of wealth and the degree of inequality affects growth. We show how lower wealth can lead to lower growth and even to stagnation when the incentives to domestic accumulation are weakened by redistributive considerations.     

Mixing on function spaces

Summary We prove that a probability measure over a space of functions induces a measure over the product space of the image and range of these functions. As an application, we show that the equilibrium of large anonymous games with uncertainty completely describes the behavior of players. In the second part of the paper we prove that mixed strategies over function spaces are equivalent to behavioral and distributional strategies.     

PORTFOLIO SELECTION WITH MONOTONE MEAN-VARIANCE PREFERENCES

We propose a portfolio selection model based on a class of monotone preferences that coincide with mean-variance preferences on their domain of monotonicity, but differ where mean-variance preferences fail to be monotone and are therefore not economically meaningful. The functional associated with this new class of preferences is the best approximation of the mean-variance functional among those which are monotonic. We solve the portfolio selection problem and we derive a monotone version of the capital asset pricing model (CAPM), which has two main features: (i) it is, unlike the standard CAPM model, arbitrage free, (ii) it has empirically testable CAPM-like relations. The monotone CAPM has thus a sounder theoretical foundation than the standard CAPM and a comparable empirical tractability.     

Trasformata inversa di laplace per funzioni positive e problema dei momenti

Si propone un nuovo metodo per l'inversione numerica della transformata di Laplace per funzioni positive, tipicamente densità di probabilità. La funzione approssimante è ottenuta ricorrendo al principio di Massima Entropia, assumendo come informazione limitata i momenti della funzione da ricostruire, a loro volta legati da ben note relazioni alle derivate della funzione transformata. Dopo aver richiamato alcuni risultati teorici noti in letteratura concernenti l'esistenza dell'approssimante e la convergenza in entropia (e di conseguenza in normaL ₁), si presentano alcuni risultati teorici originali sul condizionamento del problema e alcuni risultati numerici che illustrano la bontà dell'approssimante.

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Summary A new method for the numerical Laplace transform inversion of positive functions, tipically probability density functions, is proposed. The approximating function is obtained resorting to the maxientropic approach, by assuming its moments as partial available information. Some known theoretical results concerning the existence and entropy convergence are reviewed. New theoretical results about the conditioning of the problem and some numerical simulations are illustrated.

     

Public spending and optimal taxes without commitment

We consider a representative agent, infinite-horizon economy where production requires private and public capital. The supply of public capital is financed through distortionary taxation. The optimal (second best) tax policy of a benevolent government is time inconsistent. We therefore introduce explicitly the constraint that at no point in time the revision of the original tax plan is desirable. We completely characterize the (third best) tax plan that satisfies this constraint, and estimate the difference in tax rate between the second and third best policy for a wide range of parameters. For some of these the difference between the second and third best tax rates is large, and so are the associated rates of economic growth.