Testable Restrictions of General Equilibrium Theory in Exchange Economies with Externalities

Number: 
231
Published: 
Classification JEL: 
D12, D50, D62
Keywords: 
Human capital agglomeration, Social returns, Private returns, Externalities, Uncertainty, Fiscal policy

The theory of general equilibrium was criticized for its apparent lack of testable implications, as seemingly implied by the results of Sonnenschein, Mantel and Debreu in the Seventies. This view was challenged by the results of Brown and Matzkin (1996),