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Optimal growth and cycles in overlapping generations models (*)

Author

Listed:
  • Philippe Michel

    (I.U.F., L.E.Q.A.M.-G.R.E.Q.A.M., Université de la Méditerranée, F-13002 Marseille, FRANCE)

  • Alain Venditti

    (G.R.E.Q.E.-G.R.E.Q.A.M., C.N.R.S., F-13002 Marseille, FRANCE)

Abstract

This paper investigates the dynamical properties of optimal paths in one-sector overlapping generations models without assuming that the utility function of the representative agent is separable. When the utility function is separable, the optimal growth paths monotonically converges toward the modified golden rule steady state. In the non-separable case, we show that the optimal growth path may be oscillating and optimal twoperiod cycles may exist. Applying these results to the model with altruism, we show that the condition of operative bequest is fully compatible with endogeneous fluctuations provided that the discount factor is close enough to one. All our results are illustrated using Cobb-Douglas utility and production functions.

Suggested Citation

  • Philippe Michel & Alain Venditti, 1997. "Optimal growth and cycles in overlapping generations models (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(3), pages 511-528.
    • Handle: RePEc:spr:joecth:v:9:y:1997:i:3:p:511-528
    Note: Received: March 20, 1995; revised version December 1, 1995
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    Citations

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    Cited by:

    1. Michel, Philippe & Thibault, Emmanuel & Vidal, Jean-Pierre, 2006. "Intergenerational altruism and neoclassical growth models," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 15, pages 1055-1106, Elsevier.
    2. Kazuo Mino & Koji Shimomura & Ping Wang, 2005. "Occupational Choice and Dynamic Indeterminacy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 138-153, January.
    3. Thomas Seegmuller, 2005. "Steady state analysis and endogenous fluctuations in a finance constrained model," Cahiers de la Maison des Sciences Economiques v05029, Université Panthéon-Sorbonne (Paris 1).
    4. Pelgrin, Florian & Venditti, Alain, 2022. "On the long-run fluctuations of inheritance in two-sector OLG models," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    5. Croix, David de la & Michel, Philippe, 1999. "Optimal growth when tastes are inherited," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 519-537, February.
    6. Bosi, Stefano & Magris, Francesco & Venditti, Alain, 2005. "Competitive equilibrium cycles with endogenous labor," Journal of Mathematical Economics, Elsevier, vol. 41(3), pages 325-349, April.
    7. Sarkar, Jayanta, 2007. "Growth dynamics in a model of endogenous time preference," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 528-542.
    8. Been-Lon Chen & Shun-Fa Lee, 2005. "Congestible Public Goods and Indeterminacy in a Two-sector Endogenous Growth Model," IEAS Working Paper : academic research 05-A003, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    9. Maldonado, Wilfredo Leiva, 2000. "Cycles, Steady States and Sunspot Equilibrium in Models with Memory," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 20(2), November.
    10. Hamada, Kojun & Yanagihara, Mitsuyoshi, 2016. "Intergenerational altruism and the transfer paradox in an overlapping generations model," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 161-167.
    11. Garcia-Belenguer, Fernando, 2007. "Stability, global dynamics and Markov equilibrium in models of endogenous economic growth," Journal of Economic Theory, Elsevier, vol. 136(1), pages 392-416, September.
    12. Fabrizio Orrego, 2014. "Habit formation and indeterminacy in overlapping generations models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 225-241, January.
    13. Wilfredo Leiva, 1999. "Adaptive learning in models with lagged variables," Economics Working Papers 413, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Haruyama, Tetsugen & Park, Hyun, 2017. "A simple dynastic economy with parental time investment in children’s patience," Economic Modelling, Elsevier, vol. 61(C), pages 235-247.
    15. García-Belenguer, Fernando, 2006. "Stability, Global Dynamics and Markov Equilibrium in Models of Economic Growth," Working Papers in Economic Theory 2006/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    16. Hippolyte d’Albis & Emmanuelle Augeraud-Véron, 2007. "Balanced cycles in an OLG model with a continuum of finitely-lived individuals," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(1), pages 181-186, January.

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