Robust Comparative Statics in Large Dynamic Economies
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.
We would like to thank Alex Frankel, Hugo Hopenhayn, Ivan Werning, and seminar participants at Bilkent University, University of Konstanz, Universidad de San Andres, and the 2012 North American Econometric Society Meeting in Chicago. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Daron Acemoglu & Martin Kaae Jensen, 2015. "Robust Comparative Statics in Large Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 587 - 640. citation courtesy of