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Applied and bridge studies study record
Public economics, trade & developmentThe Factor-Structure Welfare Theorem: APT, Non-Participant Exposure, and the Price of Systematic Risk Outside the Market
STATUS · Manuscript in progressSSRN · Not yet posted
MECHANISM
Identify the incentive structure and the condition that would falsify the claim.
RULE CHANGE
Read the intervention only after the paper shows how the current payoff space fails to support system welfare.
READER USE
Use the summary to see where private gain creates system exposure, then check the study record.
Contribution — what this adds to the conversation
Theoretical contribution to asset pricing and welfare economics; bridges APT and incomplete-markets welfare literature; provides closed-form welfare wedge and testable predictions.
WHAT'S NEW · First formal derivation of welfare cost on non-participants in APT economies using Ross's own apparatus; novel use of Recovery Theorem as welfare instrument.
The Factor-Structure Welfare Theorem formalizes the welfare cost that no-arbitrage factor pricing imposes on non-participants—pensioners, taxpayers, workers, and sovereign populations. Using Ross's APT and Recovery Theorem, it derives a closed-form welfare wedge and estimates annual U.S. costs at $320 billion.