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Optimal growth with heterogeneous agents and the twisted turnpike: An example

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  • Robert A. Becker

Abstract

The dynamics of a welfare maximizing, heterogeneous agent, one sector optimal Ramsey model is analyzed assuming two agents, each with a distinct discount factor and log utility. Production is Cobb-Douglas. Explicit time varying policy functions are derived, one for each period. A Twisted Turnpike Property and eventually monotone dynamics are demonstrated to govern the evolution of the economy’s aggregate capital stock.

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File URL: http://hdl.handle.net/10.1111/j.1742-7363.2011.00172.x
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Bibliographic Info

Article provided by The International Society for Economic Theory in its journal International Journal of Economic Theory.

Volume (Year): 8 (2012)
Issue (Month): 1 (03)
Pages: 27-47

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Handle: RePEc:bla:ijethy:v:8:y:2012:i:1:p:27-47

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1742-7355

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References

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  1. Timothy J. Kehoe & David K. Levine & Paul M. Romer, 1989. "Determinacy of equilibria in dynamic models with finitely many consumers," Staff Report 118, Federal Reserve Bank of Minneapolis.
  2. Timothy J. Kehoe, 1990. "Computation and Multiplicity of Equilibria," Discussion Paper Serie A 309, University of Bonn, Germany.
  3. DURAN, Jorge & LE VAN, Cuong, 2000. "A simple proof of existence of equilibrium in a one sector growth model with bounded or unbounded returns from below," CORE Discussion Papers 2000050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
  5. Timothy J Kehoe & David K Levine, 1985. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Levine's Working Paper Archive 1873, David K. Levine.
  6. Cuong LE VAN & Yiannis VALAKIS, 2001. "Existence of a competitive equilibrium in one sector growth model with heterogeneous agents and irreversible investment," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Coles, Jeffrey L., 1986. "Equilibrium turnpike theory with time-separable utility," Journal of Economic Dynamics and Control, Elsevier, vol. 10(3), pages 367-394, September.
  8. Coles, Jeffrey Link, 1985. "Equilibrium Turnpike Theory with Constant Returns to Scale and Possible Heterogeneous Discount Factors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 671-79, October.
  9. Takashi Kamihigashi, 2008. "On the principle of optimality for nonstationary deterministic dynamic programming," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(4), pages 519-525.
  10. Bliss, Christopher, 1999. "The Real Rate of Interest: A Theoretical Analysis," Oxford Review of Economic Policy, Oxford University Press, vol. 15(2), pages 46-58, Summer.
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Cited by:
  1. repec:ipg:wpaper:201404 is not listed on IDEAS
  2. repec:hal:psewpa:halshs-00793530 is not listed on IDEAS
  3. Stefano Bosi & Cuong Le Van, 2011. "On the existence of a Ramsey equilibrium with endogenous labor supply and borrowing constraints," Documents de travail du Centre d'Economie de la Sorbonne 11045, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  4. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2012. "On existence, efficiency and bubbles of Ramsey equilibrium with borrowing constraints," Caepr Working Papers 2012-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  5. repec:hal:cesptp:halshs-00793530 is not listed on IDEAS
  6. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2014. "On existence and bubbles of Ramsey equilibrium with borrowing constraints," Working Papers 2014-105, Department of Research, Ipag Business School.
  7. repec:ipg:wpaper:4 is not listed on IDEAS

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