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On efficiency and local uniqueness in two-sector OLG economies

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  • Drugeon, Jean-Pierre
  • Nourry, Carine
  • Venditti, Alain

Abstract

We consider a two-sector overlapping generations model with homothetic preferences. Under standard conditions on technologies, upon large enough values for the share of first period consumption over the wage income, we prove that the dynamic efficiency and local uniqueness of the competitive equilibrium hold. On the contrary, for lower values of the share of first period consumption over the wage income which imply dynamic inefficiency of the steady state, local indeterminacy arises when the elasticity of intertemporal substitution in consumption is large enough.

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Bibliographic Info

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 59 (2010)
Issue (Month): 1 (January)
Pages: 120-144

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Handle: RePEc:eee:matsoc:v:59:y:2010:i:1:p:120-144

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Web page: http://www.elsevier.com/locate/inca/505565

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Keywords: Two-sector OLG model Efficiency Local uniqueness;

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References

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  1. Lloyd-Braga, Teresa & Nourry, Carine & Venditti, Alain, 2005. "Indeterminacy in Dynamic Models: When Diamond Meets Ramsey," CEPR Discussion Papers 5255, C.E.P.R. Discussion Papers.
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  7. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
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  12. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
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  16. Cremers, Emily, 2006. "Dynamic Efficiency in the Two-Sector Overlapping Generations Model," Staff General Research Papers 34856, Iowa State University, Department of Economics.
  17. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, November.
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Citations

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Cited by:
  1. Antoine Le Riche & Carine Nourry & Alain Venditti, 2012. "Efficient Endogenous Fluctuations in Two-Sector OLG Model," AMSE Working Papers 1242, Aix-Marseille School of Economics, Marseille, France, revised Dec 2012.
  2. Nourry, Carine & Venditti, Alain, 2011. "Local indeterminacy under dynamic efficiency in a two-sector overlapping generations economy," Journal of Mathematical Economics, Elsevier, vol. 47(2), pages 164-169, March.
  3. Valente, Simone, 2011. "Habit formation and resource dependence in dynastic economies," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 131-145, May.
  4. Nourry, Carine & Venditti, Alain, 2012. "Endogenous Business Cycles In Overlapping-Generations Economies With Multiple Consumption Goods," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S1), pages 86-102, April.

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