Normative inference with heterogeneous agents
Marshall wrote a long time ago: "[...] expenditure on any one thing, as, for instance, tea, is only a small part of his whole expenditure" (Principles of Economics p.17). If so, policy that affects one market should have negligible impact on the marginal utility of money. We build on this intuition and construct a stochastic (stationary) infinite horizon small open economy to study quasi-linear approximations in welfare inference. The draft of the paper is already available (see to the right), which made it possible for participants of the session to give great insights and useful comments. Thanks to all!