Asset Accumulation, Fertility Choice and Nondegenerate Dynamics in a Small Open Economy
Abstract
This paper shows that the assumption of elastic fertility choices represents an unconsidered way of introducing nondegenerate dynamics within an immortal small open economy, facing perfect capital mobility and no adjustment costs associated with capital accumulation, and having a fixed discount rate. The transient dynamics are obtained since fertility, which enters the Euler equation, renders the growth of the marginal utility of wealth strictly interconnected with wealth accumulation. The comparative dynamics are studied for two exogenous shocks: an increase in thrift, which changes fertility and capital formation permanently, and an increase in government spending, which alters fertility and capital stock temporarily.Download Info
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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.121.Length:
Date of creation: Oct 2004
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Handle: RePEc:fem:femwpa:2004.121
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Keywords: Endogenous population; Capital accumulation; Current account; Transitional dynamics;Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
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