Competitive Equilibria with Limited Enforcement

33 Pages Posted: 26 Jul 2002 Last revised: 26 Oct 2022

See all articles by Patrick J. Kehoe

Patrick J. Kehoe

Federal Reserve Bank of Minneapolis - Research Department; University of Minnesota - Twin Cities - Department of Economics; National Bureau of Economic Research (NBER)

Fabrizio Perri

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: July 2002

Abstract

This study demonstrates how constrained efficient allocations can arise endogenously as equilibria in an economy with a limited ability to enforce contracts and with private agents behaving competitively, taking a set of taxes as given. The taxes in this economy limit risk-sharing and arise in an equilibrium of a dynamic game between governments of sovereign nations. The equilibrium allocations depend on governments choosing to tax both the repayment of international debt and the income from capital investment in their countries.

Suggested Citation

Kehoe, Patrick J. and Perri, Fabrizio, Competitive Equilibria with Limited Enforcement (July 2002). NBER Working Paper No. w9077, Available at SSRN: https://ssrn.com/abstract=320267

Patrick J. Kehoe (Contact Author)

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Fabrizio Perri

Leonard N. Stern School of Business - Department of Economics ( email )

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