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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. 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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  11. Brock, William A, 1973. "Some Results on the Uniqueness of Steady States in Multisector Models of Optimum Growth when Future Utilities are Discounted," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 535-59, October.
  12. Cremers, Emily, 2006. "Dynamic Efficiency in the Two-Sector Overlapping Generations Model," Staff General Research Papers 34856, Iowa State University, Department of Economics.
  13. Venditti, Alain, 2005. "The two sector overlapping generations model: A simple formulation," Research in Economics, Elsevier, vol. 59(2), pages 164-188, June.
  14. Guido Cazzavillan & Patrick Pintus, 2006. "Dynamic Inefficiency in an Overlapping Generations Economy with Production," Working Papers 2006_40, Department of Economics, University of Venice "Ca' Foscari".
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Citations

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Cited by:
  1. 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.
  2. Carine Nourry & Alain Venditti, 2009. "Local indeterminacy under dynamic efficiency in a two-sector overlapping generations economy," Working Papers halshs-00439240, HAL.
  3. Valente, Simone, 2011. "Habit formation and resource dependence in dynastic economies," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 131-145, May.
  4. 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.

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