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Explaining structural change towards and within the financial sector


Falkinger, Josef; Studer, Sabrina; Zhao, Yingnan (2015). Explaining structural change towards and within the financial sector. Working paper series / Department of Economics 206, University of Zurich.

Abstract

This paper presents a 3x3 general equilibrium model of an OLG-economy with technological uncertainty, heterogeneous agents and quasi-homothetic preferences to analyze structural change between the real and the financial sector as well as within the financial sector. Besides the consumption and investment good two types of financial services are produced. The three factors of production are: Capital, skilled and unskilled labor. Financial services are needed for transforming savings into future consumption possibilities. The financial market provides deposits and an incomplete set of securities. Payoffs of assets are determined by the future profitability of the technolo- gies in which they are invested. We show the channels through which structural change and inequality reinforce each other and show how they simultaneously emerge from rising per-capita income, an increase in skill supply and technical change.

Abstract

This paper presents a 3x3 general equilibrium model of an OLG-economy with technological uncertainty, heterogeneous agents and quasi-homothetic preferences to analyze structural change between the real and the financial sector as well as within the financial sector. Besides the consumption and investment good two types of financial services are produced. The three factors of production are: Capital, skilled and unskilled labor. Financial services are needed for transforming savings into future consumption possibilities. The financial market provides deposits and an incomplete set of securities. Payoffs of assets are determined by the future profitability of the technolo- gies in which they are invested. We show the channels through which structural change and inequality reinforce each other and show how they simultaneously emerge from rising per-capita income, an increase in skill supply and technical change.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:O16, J31, D90
Uncontrolled Keywords:Structural change, financialization, quasi-homothetic portfolio decision, inequality
Language:English
Date:October 2015
Deposited On:14 Oct 2015 14:20
Last Modified:16 Aug 2017 13:40
Series Name:Working paper series / Department of Economics
Number of Pages:84
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/static/wp/econwp206.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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