Research Articles: Peer Group Effects in Applied General Equilibrium

Posted: 25 Jun 2001

See all articles by Elizabeth M. Caucutt

Elizabeth M. Caucutt

University of Western Ontario - Department of Economics

Abstract

In this paper, I develop an applied general equilibrium environment with peer group effects. The application I consider is schooling. The framework used here is general equilibrium with clubs. I establish the existence of equilibrium for the economy with a finite number of school types. This result is then extended to the case where the set of school types is a continuum. The two welfare theorems are shown to hold for both economies. To compute the equilibrium, I construct a Negishi mapping from the set of weights on individual type's utility to the set of transfers that support the corresponding Pareto allocations as competitive equilibria with transfers. Because this mapping is a correspondence, a version of Scarf's algorithm is used to find a competitive equilibrium.

JEL Classification: D58, C62, I2

Suggested Citation

Caucutt, Elizabeth M., Research Articles: Peer Group Effects in Applied General Equilibrium. Available at SSRN: https://ssrn.com/abstract=250648

Elizabeth M. Caucutt (Contact Author)

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada

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