Information Heterogeneity in the Macroeconomy ∗

@inproceedings{Porapakkarm2008InformationHI,
  title={Information Heterogeneity in the Macroeconomy ∗},
  author={Ponpoje Porapakkarm and Eric R. Young},
  year={2008}
}
This paper considers the role that information heterogeneity can play in generating wealth inequality. We solve a model where households face both aggregate and idiosyncratic shocks to returns and wages under two assumptions about information – fully-informed (FI) economies have agents who observe all states while partially-informed (PI) economies have agents that must rely on the Kalman filter to extract estimates of the states based on observed prices. We find that the PI economy has higher… CONTINUE READING
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