Distributional Implications of Imperfect Capital Markets

The primary aim of this study is to analyze the impact of imperfections in capital markets on individuals' lifetime allocation plans and the resulting implications for income distribution. The model builds upon Samuelson's overlapping generation model with human capital and bequest motives playing central roles. The model developed here introduces a limit on the individual's ability to borrow. One of the most important consequences of this constraint is that human investment falls short of the level where its marginal return is equal to that of non-human investment. The comparative static results show that an individual who has been subject to the borrowing constraint would increase human investment unambiguously if he were allowed to borrow freely against future earnings. Discussions of the distributive implications of this result suggest that the elimination of the borrowing constraint has a potential of enhancing both intragenerational income equality and intergenerational mobility. The simulation results show that the elimination of the borrowing limit would bring about a significant improvement in income distribution without having an adverse effect on efficiency.

Exact Zeros of the Partition Function for a Continuum System with Double Gaussian Peaks

We calculate the exact zeros of the partition function for a continuum system where the probability distribution for the order parameter is given by two asymmetric Gaussian peaks. When the positions of the two peaks coincide, the two separate loci of zeros which used to give first-order transition touch each other, with density of zeros vanishing at the contact point on the positive real axis. Instead of the second-order transition of Ehrenfast classification as one might naively expect, one finds a critical behavior in this limit.Comment: 13 pages, 6 figures, revtex, minor changes in fig.2, to be published in Physical Review