Quasi-linear preferences in the macroeconomy: Indeterminacy, heterogeneity and the representative consumer
نویسندگان
چکیده
Weuse aggregation theory to investigate the link between one-consumer andmulti-consumer economies under a quasi-linear class of preferences. Our study is carried out in the context of the neoclassical growthmodel. The quasi-linear preferences considered are additive in consumption and leisure and linear in leisure. We first show that in a homogeneous agents economy, the individual hours worked are not uniquely determined. We then demonstrate that the indeterminacy can be resolved by introducing heterogeneity. For example, idiosyncratic shocks to productivities or imperfect substitutability of labor restore the uniqueness of equilibrium. As a special case, our analysis includes the indivisible labor model by Hansen (1985). JEL Classification C73, D90, E21
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