2015-10: Generic Existence of Equilibria in Finite Horizon Finance Economies with Stochastic Taxation

The paper proves the existence of equilibria in the finite horizon general equilibrium with incomplete markets (GEI) model with insecure property rights. Insecure property rights come in the form of the stochastic taxes imposed on agents’ endowments and assets’ dividends. This paper finds that under reasonable assumptions, Financial Markets (FM) equilibria exist for most of the stochastic tax rates. Moreover, sufficiently small changes in stochastic taxation preserve the existence and completeness of FM equilibria.