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Social Security and Equity Investment in an Economy with Financial Intermediaries and Costly Monitoring

Giorgio Di Giorgio

Title:
Social Security and Equity Investment in an Economy with Financial Intermediaries and Costly Monitoring
Author(s):
Di Giorgio, Giorgio
Date:
Type:
Reports
Department(s):
Economics
Persistent URL:
Series:
Department of Economics Discussion Papers
Part Number:
9596-37
Notes:
September 1996
Publisher:
Department of Economics, Columbia University
Publisher Location:
New York
Abstract:
This paper aims at extending the analysis of the efficiency of equilibria in an OLG framework with asymmetric information. It focuses on the stationary states of an economy where consumers, firms and financial intermediaries are at work. The process of financial intermediation is affected by ex-post moral hazard due to costly state verification; for this reason, the introduction of social security might be Pareto improving in a market economy even when the economy is dynamically efficient. Moreover, market outcomes are socially inefficient, even when a weaker notion than Pareto optimality is considered. A full characterization of a Constrained Pareto Optimum (CPO) shows that this allocation can never be induced as the result of an optimal policy in a market economy.
Subject(s):
Economics
Item views
193
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Suggested Citation:
Giorgio Di Giorgio, , Social Security and Equity Investment in an Economy with Financial Intermediaries and Costly Monitoring, Columbia University Academic Commons, .

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