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On Characterizing Equilibria of Economies with Externalities and Taxes as Solutions to Optimization Problems

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Author Info
Kehoe, Timothy J
Levine, David K
Romer, Paul M

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Abstract

We characterize equilibria of general equilibrium models with externalities and taxes as solutions to optimization problems. This characterization is similar to Negishi's characterization of equilibria of economies without externalities or taxes as solutions to social planning problems. It is often useful for computing equilibria or deriving their properties. Frequently, however, finding the optimization problem that a particular equilibrium solves is difficult. This is especially true in economies with multiple equilibria. In a dynamic economy with externalities or taxes there may be a robust continuum of equilibria even if there is a representative consumer. This indeterminacy of equilibria is closely related to that in overlapping generations economies.

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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 2 (1992)
Issue (Month): 1 (January)
Pages: 43-68
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Handle: RePEc:spr:joecth:v:2:y:1992:i:1:p:43-68

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Timothy J. Kehoe, 1985. "The Comparative Statics Properties of Tax Models," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 314-34, May. [Downloadable!] (restricted)
  3. Terje Hansen & Tjalling C. Koopmans, 1972. "On the Definition and Computation of a Capital Stock Invariant Under Optimization," Cowles Foundation Discussion Papers 313R, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Kehoe, Timothy J. & Levine, David K. & Romer, Paul M., 1990. "Determinacy of equilibria in dynamic models with finitely many consumers," Journal of Economic Theory, Elsevier, vol. 50(1), pages 1-21, February. [Downloadable!] (restricted)
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  6. Becker, Robert A., 1985. "Capital income taxation and perfect foresight," Journal of Public Economics, Elsevier, vol. 26(2), pages 147-167, March. [Downloadable!] (restricted)
  7. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Chang, Fwu-Ranq, 1988. "The Inverse Optimal Problem: A Dynamic Programming Approach," Econometrica, Econometric Society, vol. 56(1), pages 147-72, January. [Downloadable!] (restricted)
  9. Timothy J. Kehoe & David K. Levine, 1990. "The Economics of Indeterminacy in Overlapping Generations Models," Levine's Working Paper Archive 2193, David K. Levine. [Downloadable!]
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  10. Howitt, Peter & McAfee, R Preston, 1988. "Stability of Equilibria with Externalities," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 261-77, May. [Downloadable!] (restricted)
  11. Laitner, John, 1990. "Tax Changes and Phase Diagrams for an Overlapping Generations Model," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 193-220, February. [Downloadable!] (restricted)
  12. Kehoe, Timothy J & Levine, David K, 1985. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Econometrica, Econometric Society, vol. 53(2), pages 433-53, March. [Downloadable!] (restricted)
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  13. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-97, March. [Downloadable!] (restricted)
  14. Chipman, John S., 1974. "Homothetic preferences and aggregation," Journal of Economic Theory, Elsevier, vol. 8(1), pages 26-38, May. [Downloadable!] (restricted)
  15. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December. [Downloadable!] (restricted)
  16. Laitner, John, 1984. "Transition time paths for overlapping-generations models," Journal of Economic Dynamics and Control, Elsevier, vol. 7(2), pages 111-129, May. [Downloadable!] (restricted)
  17. Timothy J. Kehoe & David K. Levine & Andreu Mas-Colell & William Zame, 1989. "Determinacy of Equilibrium in Large Square Economies," Levine's Working Paper Archive 46, David K. Levine. [Downloadable!]
  18. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  19. Spear, Stephen E., 1991. "Growth, externalities, and sunspots," Journal of Economic Theory, Elsevier, vol. 54(1), pages 215-223, June. [Downloadable!] (restricted)
  20. Ginsburgh, Victor A. & Van der Heyden, Ludo, 1988. "On extending the negishi approach to computing equilibria: The case of government price support policies," Journal of Economic Theory, Elsevier, vol. 44(1), pages 168-178, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mino, Kazuo, 2004. "On the Generalized Weitzman's Rule," MPRA Paper 16996, University Library of Munich, Germany. [Downloadable!]
  2. Francesco Busato & Bruno Charini & Enrico Marchetti, 2004. "Indeterminacy, Underground Activities and Tax Evasion," Economics Working Papers 2004-12, School of Economics and Management, University of Aarhus. [Downloadable!]
    Other versions:
  3. Fukuda, Shin-ichi, 1997. "Multiple Equilibria in the Endogenous Economic Growth Model with the Cash-in-Advance Constraint ," CIRJE F-Series 97-F-11, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  4. Kevin Reffett & Manjira Datta & Leonard Mirman & Olivier Morand, . "Monotone Methods for Markovian Equilibrium in Dynamic Economies," Working Papers 2133476, Department of Economics, W. P. Carey School of Business, Arizona State University. [Downloadable!]
    Other versions:
  5. Shantayanan Devarajan & Danyang Xie & Heng-Fu Zou, 2002. "Should Public Capital Be Subsidized or Provided?," Macroeconomics 0212005, EconWPA. [Downloadable!]
    Other versions:
  6. Christian Ghiglino & Marielle Olszak-Duquenne, 2002. "The impact of heterogeneity on indeterminacy," Diskussionsschriften dp0213, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  7. Farmer, Roger E A & Lahiri, Amartya, 2002. "A Two-Country Model of Endogenous Growth," CEPR Discussion Papers 3245, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Manuel Santos, . "On Non-Existence of Markov Equilibria in Competitive-Market Economies," Working Papers 2133305, Department of Economics, W. P. Carey School of Business, Arizona State University. [Downloadable!]
  9. repec:att:wimass:1919999 is not listed on IDEAS
  10. Larry E. Jones & Rodolfo E. Manuelli & Ennio Stacchetti, 1999. "Technology (and Policy) Shocks in Models of Endogenous Growth," NBER Working Papers 7063, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Michele Boldrin & Aldo Rustichini, 1991. "Indeterminacy of Equilibrium in Dynamic Models with Externalities," Discussion Papers 955R, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  12. Christian Ghiglino & Marielle Olszak-Duquenne, 2004. "On the Impact of Heterogeneity on Indeterminacy," Cahiers du Département d'Econométrie 2004.09, Département d'Econométrie, Université de Genève. [Downloadable!]
    Other versions:
  13. Baruch Gliksberg, 2009. "Monetary policy and multiple equilibria with constrained investment and externalities," Economic Theory, Springer, vol. 41(3), pages 443-463, December. [Downloadable!] (restricted)
  14. Sergio Rebelo & Danyang Xie, 1997. "On the Optimality of Interest Rate Smoothing," NBER Working Papers 5947, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Jaime Alonso-Carrera & Maria Jesus Freire-Seren & Baltasar Manzano, 2008. "Macroeconomic Effects From The Regional Allocation Of Public Capital Formation," CAMA Working Papers 2008-09, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
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