Adverse Selection, Slow Moving Capital and Misallocation
Event details
| Date | 23.05.2014 |
| Hour | 10:30 › 12:00 |
| Speaker | Brett GREEN (Berkeley Haas) |
| Location | |
| Category | Conferences - Seminars |
Adverse selection is commonly used to explain trade inefficiencies in many markets. In this paper, we embed an informational asymmetry into a decentralized economy with heterogeneous capital and study its implications for aggregate dynamics in a general equilibrium environment. We show that the information friction leads to slow moving capital and persistent misallocation of resources. The model can help explain why economies recover slowly, even from shocks that do not affect potential output. It also provides a micro-foundation for convex adjustment costs, and a link between the underlying economic environment and the magnitude of adjustment costs.
Links
Practical information
- Expert
- Free