Information Asymmetry and Inequalities in Macroeconomics

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Information has a fundamental role in determining individual choices: while each action is made conditional on the available information, this is potentially heterogeneous across individuals despite the existence of a common state of the world. When information is asymmetric non only across similar individuals, but also across different groups (similar individuals of the same "type"), who knows what matters not only at individual level, but can also affect the economy as a whole by modifying the aggregate consumption and saving behaviour, so that information inequalities "matters for macroeconomics".In this project, I explore how information asymmetries about the future dynamics of the economy can persist in equilibrium even when agents are fully rational and can observe all prices, amplifying the effects of the business cycle or even generating it. The contribution is to pin down a new mechanism of business cycle generation and amplification relying on information differentials but not on behavioural assumptions. Furthermore, I address the implications for conventional and unconventional policy-making arising from considering the beliefs-coordination mechanism of policy intervention.In fact, the implications of this mechanism are multifold. The business cycle is affected in non-trivial ways as agents are less able to understand how current prices reflect the underlying state of the world. First, this can affect various dimensions of ex-post and observable inequalities (e.g. wealth and education choices). Second, it creates a dilemma regarding the fiscal and monetary policy intervention: is revealing private information of the policy-maker optimal if "announcing" can lead to uncoordinated reactions across different individuals due to their different ex-ante information? "Simpler" policy instruments may be more effective than the apparently "optimal" ones when their ability to pin down similar beliefs across all agents - and thus coordinated reactions - is considered. Third, when information heterogeneity "matters for macro", individual information-acquisition choices lead to economic externalities. When this happens, the planner/policy-maker should address the issue by internalizing the externalities induced by individually optimal but potentially socially sub-optimal information acquisition choices.