Behavioral Biases in General Equilibrium: Implications for Wealth Inequality and Human Capital Formation
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Date
2018-09-06
Authors
Nighswander, Tristan
Journal Title
Journal ISSN
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Publisher
University of Oregon
Abstract
My research focuses on the integration of behavioral economics into well understood general equilibrium macroeconomic models populated by overlapping generations of heterogeneous agents. Specifically, I analyze the implications of populating model economies with present-biased agents who are finitely lived, subject to idiosyncratic labor income shocks, and heterogeneous in both exponential and present-biased discount factors. My primary goal is characterizing the contribution of behavioral biases towards resolving several issues in the literature pertaining to human capital investment and aggregate wealth inequality. Further, the inclusion of present bias in carefully calibrated model economies allows me to rationalize empirical differences in consumption, wealth, and education that arise between observationally similar households that models of homogeneous, exponential discounters are unable to match.
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Keywords
Behavioral economics, Human capital, Inequality, Macroeconomics