Maliar, L. and S. Maliar
Journal of Economic Dynamics & Control – 25 (2001) 1367}1397

Keywords: Neoclassical model, Heterogeneous agents, Aggregation, Business cycles

Abstract: Does a heterogeneous agents version of a neoclassical model with labor/leisure choice replicate the distributions of consumption and working hours observed in the crosssectional data? Does incorporating heterogeneity enhance the aggregate performance of the representative agent model? We address these questions in a complete market model economy with two sources of heterogeneity: initial endowments and non-acquired skills. We find positive answers to both questions. 2001 Elsevier Science B.V. All rights reserved.