Asset pricing when risk sharing is limited by default: a theoretical framework

We study the asset pricing implications of an endowment economy when agents can default on contracts that would leave them otherwise worse off. We specialize and extend the environment studied by Kocherlakota (1995) and Kehoe and Levine (1993) to make it comparable to standard studies of asset pricillg. We completely charactize efficient allocations for several special cases. We illtroduce a competitive equilibrium with complete markets alld with elldogellous solvency constraints. These solvellcy constraints are such as to prevent default -at the cost of reduced risk sharing. We show a version of the classical welfare theorems for this equilibrium definition. We characterize the pricing kernel, alld compare it with the one for economies without participation constraints : interest rates are lower and risk premia can be bigger depending on the covariance of the idiosyncratic and aggregate shocks. Quantitative examples show that for reasonable parameter values the relevant marginal rates of substitution fali within the Hansen-Jagannathan bounds.

Other-Regarding Preferences in General Equilibrium

We study competitive market outcomes in economies where agents have other-regarding preferences. We identify a separability condition on monotone preferences that is necessary and sufficient for one’s own demand to be independent of the allocations and characteristics of other agents in the economy. Given separability, it is impossible to identify other-regarding preferences from market behavior: agents be- have as if they had classical preferences that depend only on own consumption in competitive equilibrium. If preferences, in addition, depend only on the final allocation of consumption in society, the Sec- ond Welfare Theorem holds as long as an increase in resources can be distributed such that all agents are better off. Nevertheless, the First Welfare Theorem generally does not hold. Allowing agents to care about their own consumption and the distribution of consump- tion possibilities in the economy, we provide a condition under which agents have no incentive to make direct transfers, and show that this condition implies that competitive equilibria are efficient given prices.

Wildlife Trade In Brazil: A Closer Look At Wild Pets Welfare Issues.

Wild animals have been kept as pets for centuries, in Brazil companionship is one of the main reasons why wild species are legally bred and traded. This paper is an attempt to call the attention for problems concerning the welfare of wild pets involved in the trading system in Brazil. Some issues presented are: a) the significant increase in the number of wildlife breeders and traders and the difficulties faced by of the Brazilian government in controlling this activity; b) the main welfare issues faced by breeders and owners of wild pets; and c) the destination of wild pets no longer wanted. Finally, some recommendations are made having the welfare of the animals as a priority.

LIMIT THEOREMS FOR A GENERAL STOCHASTIC RUMOUR MODEL

We study a general stochastic rumour model in which an ignorant individual has a certain probability of becoming a stifler immediately upon hearing the rumour. We refer to this special kind of stifler as an uninterested individual. Our model also includes distinct rates for meetings between two spreaders in which both become stiflers or only one does, so that particular cases are the classical Daley-Kendall and Maki-Thompson models. We prove a Law of Large Numbers and a Central Limit Theorem for the proportions of those who ultimately remain ignorant and those who have heard the rumour but become uninterested in it.

Poverty - dynamic and sustainability perspectives: Implications for welfare and policy with reference to India

After outlining some comparative features of poverty in India, this article reviews critically recent literature on the dynamics of poverty. On economic efficiency grounds, it rejects the view that the chronically poor are more deserving than the non-chronic poor of poverty assistance. Mechanisms of households and communities for coping with poverty are discussed. The possibility is raised that where poverty has been persistent that rational methods for coping with it are likely to be well established, and less suffering may occur than for households and communities thrown temporarily into poverty. However, situations can also be envisaged where such rational behaviours deepen the poverty trap and create unfavourable externalities for poverty alleviation. Conflict can arise between programmes to alleviate poverty in poor communities and the sustainability of these communities and their local cultures. Problems posed by this are discussed. Furthermore, the impact of market extension on poor landholders is considered. In contrast to the prevailing view that increased market extension and liberalisation is favourable to poor farmers, it is argued that inescapable market transaction cost makes it difficult for the poor to survive as landholders in a fluid and changing market system. The likelihood of poor landholders joining the landless poor rises, and if they migrate from the countryside to the city they face further adjustment hurdles. Consequently, poor landholders may be poorer after the extension of the market system and only their offspring may reap benefits from market reforms.