Produce or Speculate? Asset Bubbles, Occupational Choice and Efficiency
41 Pages Posted: 19 Oct 2010
There are 3 versions of this paper
Produce or Speculate? Asset Bubbles, Occupational Choice and Efficiency
Produce or Speculate? Asset Bubbles, Occupational Choice and Efficiency
Produce or Speculate? Asset Bubbles, Occupational Choice and Efficiency
Date Written: October 2010
Abstract
We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits create rents in the financial sector that affect workers' choice of occupation. When rents are large, the private gains associated with trading asset bubbles may lead too many workers to become speculators, thereby causing rational bubbles to lose their efficiency properties. Moreover, if speculation can be carried out by skilled labor only, then asset bubbles displace skilled workers away from the productive sector and raise income and consumption inequalities.
Keywords: Rational bubbles, occupational choice, dynamic efficiency
JEL Classification: E22, E44, G21
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Wages and Human Capital in the U.S. Financial Industry: 1909-2006
By Thomas Philippon and Ariell Reshef
-
Wages and Human Capital in the U.S. Financial Industry: 1909-2006
By Thomas Philippon and Ariell Reshef
-
Skill Biased Financial Development: Education, Wages and Occupations in the U.S. Financial Sector
By Thomas Philippon and Ariell Reshef
-
Skill Biased Financial Development: Education, Wages and Occupations in the U.S. Financial Sector
By Thomas Philippon and Ariell Reshef
-
Financiers vs. Engineers: Should the Financial Sector Be Taxed or Subsidized?
-
Financiers Vs. Engineers:Should the Financial Sector Be Taxed or Subsidized?
-
Financiers Vs. Engineers: Should the Financial Sector Be Taxed or Subsidized?
-
The Division of Labour, Coordination, and the Demand for Information Processing
By Guy Michaels
-
Why Has the U.S. Financial Sector Grown so Much? The Role of Corporate Finance
-
Product Markets and Paychecks: Deregulation's Effect on the Compensation Structure in Banking