Peer group effects in applied general equilibrium |
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Authors: | Elizabeth M Caucutt |
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Institution: | (1) Department of Economics,University of Rochester, Rochester, NY, 14627, USA (e-mail: ecau@troi.cc.rochester.edu) , US |
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Abstract: | Summary. In this paper, I develop an applied general equilibrium environment with peer group effects. The application I consider is
schooling. The framework used here is general equilibrium with clubs. I establish the existence of equilibrium for the economy
with a finite number of school types. This result is then extended to the case where the set of school types is a continuum.
The two welfare theorems are shown to hold for both economies. To compute the equilibrium, I construct a Negishi mapping from
the set of weights on individual type's utility to the set of transfers that support the corresponding Pareto allocations
as competitive equilibria with transfers. Because this mapping is a correspondence, a version of Scarf's algorithm is used
to find a competitive equilibrium.
Received: June 9, 1999; revised version: March 13, 2000 |
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Keywords: | and Phrases:Education Peer effects Applied general equilibrium Clubs |
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