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Optimal growth when tastes are inherited Author info | Abstract | Publisher info | Download info | Related research | Statistics de la Croix, David (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))
Michel, Philippe (UniversitŽ de la MŽditerranŽe, IUF; GREQAM, Marseille)
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We address the issue of optimal growth when standard-of-living aspirations are transmitted from one generation to the next. We derive the condition for the optimal solution to be stable in the saddle-point sense and show that this optimal solution may display damped oscillations even when the planner does not discount the utility of future generations (golden rule case). The decentralization of the optimal solution aims at correcting the inter-generational externality by use of an investment subsidy and allows to avoid socially damaging rushes on consumption in expansion periods. It also allows to stabilize output in the case of competitive economies displaying endogenous fluctuations.
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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number
1997012.
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Length: 16
Date of creation: 01 Mar 1997Date of revision:
00 Jun 1997Handle: RePEc:ctl:louvir:1997012Contact details of provider: Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium) Fax: +32 10473945 Email: Web page: http://www.uclouvain.be/econ More information through EDIRC
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Keywords: Externality ; saddle-point stability ; golden rule ; oscillations ; investment subsidy ; stabilisation ; Other versions of this item:
Article Paper De La Croix, D. & Michel, P., 1997.
"Optimal Growth when Tastes are Inherited ,"
ASSET - Instituto De Economia Publica
168, ASSET (Association of Southern European Economic Theorists).
de La Croix, D. & Michel, P., 1997.
"Optimal Growth When Tastes Are Inherited ,"
G.R.E.Q.A.M.
97a21, Universite Aix-Marseille III.
Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports :
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