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Wealth distribution and aggregate time-preference: Markov-perfect equilibria in a Ramsey economy

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  • Pichler, Paul
  • Sorger, Gerhard

Abstract

We study Markov-perfect Nash equilibria (MPNE) of a Ramsey-Cass-Koopmans economy in which households are aware of their influence on prices. The Ramsey conjecture fails to hold such that households other than the most patient one own positive wealth in the steady state. This confirms results that have been derived in the same model using an open-loop equilibrium concept. In contrast to the competitive and the open-loop equilibrium, the steady state of the MPNE depends on the utility functions of the households. Since the MPNE cannot be determined analytically, a high-order least squares projection method is employed.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 1 (January)
Pages: 1-14

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:1:p:1-14

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Web page: http://www.elsevier.com/locate/jedc

Related research

Keywords: Ramsey-Cass-Koopmans model Strategic saving Markov-perfect Nash equilibrium Aggregate time preference Projection method;

References

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  1. S. Boragan Aruoba & Jesus Fernandez-Villaverde & Juan Francisco Rubio-Ramirez, 2003. "Comparing solution methods for dynamic equilibrium economies," Working Paper 2003-27, Federal Reserve Bank of Atlanta.
  2. Christian Gollier & Richard Zeckhauser, 2005. "Aggregation of Heterogeneous Time Preferences," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 878-896, August.
  3. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
  4. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  5. Gerhard Sorger, 2008. "Strategic saving decisions in the infinite-horizon model," Economic Theory, Springer, vol. 36(3), pages 353-377, September.
  6. Becker, Robert A. & Foias, Ciprian, 2007. "Strategic Ramsey equilibrium dynamics," Journal of Mathematical Economics, Elsevier, vol. 43(3-4), pages 318-346, April.
  7. Chaim Fershtman & Eitan Muller, 1983. "Capital Accumulation Games of Infinite Duration," Discussion Papers 553, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  9. Paul Pichler & Gerhard Sorger, 2006. "Markov Perfect Equilibria in the Ramsey Model," Vienna Economics Papers 0610, University of Vienna, Department of Economics.
  10. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  11. Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December.
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