Produce or speculate? Asset bubbles, occupational choice and efficiency

Arbeitspapier

We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits create rents in the financial sector that affect workers' choice of occupation. When rents are large, the private gains associated with trading asset bubbles may lead too many workers to become speculators, thereby causing rational bubbles to lose their efficiency properties. Moreover, if speculation can be carried out by skilled labor only, then asset bubbles displace skilled workers away from the productive sector and raise income and consumption inequalities.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 4630

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Financial Markets and the Macroeconomy ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: Rational bubbles ; occupational choice ; dynamic efficiency ; Börsenkurs ; Bubbles ; Makroökonomischer Einfluss ; Hochqualifizierte Arbeitskräfte ; Berufswahl ; Allokationseffizienz ; Wertpapierspekulation ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cahuc, Pierre ; Challe, Edouard
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/36022
• Last update: 10.03.2025, 11:45 AM CET