Explaining Structural Change Towards and within the Financial Sector

University of Zurich, Department of Economics, Working Paper No. 206

85 Pages Posted: 14 Oct 2015

See all articles by Josef Falkinger

Josef Falkinger

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Sabrina Studer

University of Zurich - Department of Economics

Yingnan Zhao

Peking University Law School, Students

Date Written: October 13, 2015

Abstract

This paper presents a 3x3 general equilibrium model of an OLG-economy with technological uncertainty, heterogeneous agents and quasi-homothetic preferences to analyze structural change between the real and the financial sector as well as within the financial sector. Besides the consumption and investment good two types of financial services are produced. The three factors of production are: Capital, skilled and unskilled labor. Financial services are needed for transforming savings into future consumption possibilities. The financial market provides deposits and an incomplete set of securities. Payoffs of assets are determined by the future profitability of the technologies in which they are invested. We show the channels through which structural change and inequality reinforce each other and show how they simultaneously emerge from rising per-capita income, an increase in skill supply and technical change.

Keywords: Structural change, financialization, quasi-homothetic portfolio decision, inequality

JEL Classification: O16, J31, D90

Suggested Citation

Falkinger, Josef and Studer, Sabrina and Zhao, Yingnan, Explaining Structural Change Towards and within the Financial Sector (October 13, 2015). University of Zurich, Department of Economics, Working Paper No. 206, Available at SSRN: https://ssrn.com/abstract=2674107 or http://dx.doi.org/10.2139/ssrn.2674107

Josef Falkinger (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Sabrina Studer

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

Yingnan Zhao

Peking University Law School, Students ( email )

Beijing
China

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