(with Dilip Mookherjee), American Economic Journal Microeconomics 2 38–76, 2010.
Summary. This paper studies income distribution in an economy with borrowing constraints. If the span of occupational investments is large, long-run wealth distributions display persistent inequality. With a “rich” set of occupations, so that training costs form an interval, the distribution is unique and the average return to education must rise with educational investment.
International Journal of Economic Theory 6 11–28, 2010.
Summary. The Phelps–Koopmans theorem states that if every limit point of a path of capital stocks exceeds the “golden rule,” then that path is inefficient: there is another feasible path from the same initial stock that provides at least as much consumption at every date and strictly more consumption at some date. I show that in a model with nonconvex technologies and preferences, the theorem is false in a strong sense. Not only can there be efficient paths with capital stocks forever above and bounded away from a unique golden rule, such paths can also be optimal under the infinite discounted sum of a one-period utility function.
(with Francis Bloch and Garance Genicot), Journal of Economic Theory 143, 36-58, 2008.
Summary. This paper studies bilateral insurance schemes across networks of individuals. We investigate the structure of self-enforcing insurance networks. Network links play two distinct and possibly conflictual roles. They act as conduits for both transfers and information; affecting the scope for insurance and the severity of punishments upon noncompliance. Their interaction leads to a characterization of stable networks as suitably “sparse” networks. Thickly and thinly connected networks tend to be stable, whereas intermediate degrees of connectedness jeopardize stability.