Oliver Pardo

This paper studies the effect of securitization on asset pricing when agents have heterogeneous beliefs about the stochastic process on dividends, prices and interest rates. For this purpose, the asset pricing model of Harrison and Kreps (1978) is modified to account for the possibility for agents to issue asset backed securities. The securities are constrained to belong to tranches of different payment priority, mimicking collateralized debt obligations (CDO). Securitization weakly increases the gap between the price of an underlying asset and any perceived present value of its dividends. A necessary condition for this increase to be strict is the absence of beliefs regarding the next-period price of the underlying asset which first-order stochastically dominate all others beliefs. In states of the world where investors with divergent beliefs buy securities from different tranches, the underlying asset is traded at a price higher than what anyone thinks it is worth. Since securities with a return below the market interest rate may be traded across agents, securitization has mixed effects on portfolio returns. In cases where there is a type of agent more sophisticated than all others, securitization can weakly decrease the returns all agents receive.


This paper studies the effect of lags in technology diffusion on the growth process and the distribution of income. An overlapping generations model with heterogeneous agents is constructed with this purpose. Agents are distributed in a rectangular grid where they are able to observe and copy the technology of their neighbors. The potential GDP growth of the whole economy is driven by those agents who have the highest propensity to innovate. Therefore, the growth rate is a function of the characteristics of an innovative elite, instead of being a function of some average characteristics of the whole population. The closer you are to an agent who belongs to that elite, the more likely is that you have a relatively high level of income, given the possibility of free-ride on his ideas. Because of the possible dispersion of the innovative elite across the grid, this could lead to multimodal distributions of income. Therefore, the model sets an alternative hypothesis to explain the spatial distribution of income across regions and countries.

Matrices de Contabilidad Social 2003, 2004 y 2005 para Colombia 

con Diego Corredor (Archivos de Economía No. 339, Departamento Nacional de Planeación, Febrero 2008)

En este manual se presentan los procedimientos para la construcción de las Matrices de Contabilidad Social para los años 2003, 2004 y 2005. Su objetivo es poner a disposición de las personas o instituciones que utilizan las matrices como insumo en sus investigaciones, todos los recursos necesarios para su elaboración o modificación. Para cada año, se construyen dos matrices. En la primera, se resume en un solo arreglo la información de las Cuentas Nacionales del DANE. En la segunda, el ingreso laboral es desagregado en 6 tipos de trabajo y los hogares son desagregados en deciles de ingreso. La fuente de información utilizada para la desagregación es la Encuesta de Calidad de Vida del 2003.           

Descargar Matrices de Contabilidad Social: SAMS.zip


Increasing returns in human capital accumulation and public funding of education 

(2007 LACEA and LAMES meeting, Bogotá Colombia, October 2007)

This paper evaluates the effect of public funding of education on economic growth when human capital accumulation exhibits increasing social returns. An extension of the Azariadis and Drazen (1990) model is constructed for this purpose. With increasing returns on human capital, the long-run growth rate for the economy depends on factor endowments: if human and physical capital are below (above) a certain threshold, the economy tends towards a low (high) growth rate. Public funding of education can help to escape from the low growth trap, but the lower the level of factor endowments, the greater the public funding needed for this goal. Moreover, there could be no level of public spending on education that can achieve this result if the economy is extremely poor.          

A dynamic general equilibrium model to evaluate income tax reforms in Colombia

(ECLAC XIX Regional Seminar on Fiscal Policy,  Santiago de Chile, February 2007)

This paper presents a dynamic general equilibrium model designed to evaluate the effect of income tax reforms on efficiency, welfare and economic performance. Agents are classified by their years of schooling and their years of working experience, which in turn determine their labor productivity. Their decisions over asset accumulation, consumption and labor supply are affected by the taxes. The parameters of the model are estimated and calibrated to reflect some characteristics of the Colombian economy and its income tax structure. In order to provide a numerical example of the model, the original 2006 tax reform proposed by the government is simulated. Quantitative responses of some aggregates and welfare indicators are obtained, both in the steady state and during the transition.

MATLAB source code: Download ZIP file 

Acumulación de capital humano y gasto público en educación: un modelo de generaciones traslapadas para Colombia 

(Revista ESPE, número 52, diciembre 2006)

This paper studies the effect of public financing of education on economic growth and welfare. It develops an overlapping generations model with endogenous growth where agents educate themselves to accumulate human capital and the government subsidizes a fraction of education expenditure. Parameters are calibrated to replicate some stylized facts of the Colombian economy. Simulations suggest that an increase in public expenditure on education of 1 percentage point of the GDP leads to an increase of 0.14 percentage points in the long run economic growth rate.

 MATLAB source code: Dowbload RAR file