NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Robust Comparative Statics in Large Dynamic Economies

Daron Acemoglu, Martin Kaae Jensen

NBER Working Paper No. 18178
Issued in June 2012
NBER Program(s):   EFG   IO   ME

We consider infinite horizon economies populated by a continuum of agents who are subject to idiosyncratic shocks. This framework contains models of saving and capital accumulation with incomplete markets in the spirit of works by Bewley, Aiyagari, and Huggett, and models of entry, exit and industry dynamics in the spirit of Hopenhayn's work as special cases. Robust and easy-to-apply comparative statics results are established with respect to exogenous parameters as well as various kinds of changes in the Markov processes governing the law of motion of the idiosyncratic shocks. These results complement the existing literature which uses simulations and numerical analysis to study this class of models and are illustrated using a number of examples.

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