Efficient Endogenous Fluctuations in Two-Sector OLG Model
AbstractWe consider a two-sector two-good two-periods overlapping generations model with inelastic labor, consumption in both period of life and homothetic CES preferences. There are two consumption goods, one pure(non-durable)consumption and one consumable (durable) capital good which can be either consumed or invested. Assuming gross substitutability and a capital intensive pure consumption good, we prove the existence of efficient endogenous fluctuations through a Hopf bifurcation if the share of the consumption of young in the composite good is low enough. We also show that some fiscal policy rules can improve welfare and prevent the existence of business-cycle fluctuations in the economy by driving it to the optimal steady state as soon as it is announced.
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Bibliographic InfoPaper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1242.
Length: 23 pages
Date of creation: Dec 2012
Date of revision: Dec 2012
Two-sector OLG model; multiple consumption goods; dynamic efficiency; endogenous fluctuations.;
Other versions of this item:
- Antoine Le Riche & Carine Nourry & Alain Venditti, 2012. "Efficient Endogenous Fluctuations in Two-Sector OLG Model," Working Papers halshs-00793704, HAL.
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