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On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency

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Author Info

  • Robert Becker

    ()
    (Indiana University)

  • Ram Sewak Dubey

    ()
    (Montclair State University)

  • Tapan Mitra

    ()
    (Cornell University)

Abstract

We provide a sufficient condition on the production function under which eventually the most patient household owns the entire capital stock in every Ramsey Equilibrium, called the turnpike property. This generalizes the result in the literature which establishes the turnpike property using the capital income monotonicity condition. We then provide an example of a Ramsey Equilibrium in which the most patient household reaches a no capital position infinitely often. This is a strong refutation of the turnpike property on Ramsey equilibria. We also show that the constructed Ramsey equilibrium is inefficient in terms of the aggregate consumption stream that it provides.

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File URL: http://www.iub.edu/~caepr/RePEc/PDF/2012/CAEPR2012-007.pdf
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Bibliographic Info

Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2012-007.

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Length: 30 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:inu:caeprp:2012-007

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References

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  1. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
  2. Becker, Robert A & Boyd, John H, III & Foias, Ciprian, 1991. "The Existence of Ramsey Equilibrium," Econometrica, Econometric Society, vol. 59(2), pages 441-60, March.
  3. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
  4. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2014. "On existence and bubbles of Ramsey equilibrium with borrowing constraints," Working Papers 2014-105, Department of Research, Ipag Business School.
  5. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2013. "On existence, effciency and bubbles of Ramsey equilibrium with borrowing constraints," Working Papers 15, Development and Policies Research Center (DEPOCEN), Vietnam.
  6. repec:hal:cesptp:halshs-00793530 is not listed on IDEAS
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Cited by:
  1. repec:ipg:wpaper:4 is not listed on IDEAS
  2. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2012. "On Existence and Bubbles of Ramsey Equilibrium with Borrowing Constraints," AMSE Working Papers 1231, Aix-Marseille School of Economics, Marseille, France, revised 11 Nov 2012.
  3. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2013. "On existence, effciency and bubbles of Ramsey equilibrium with borrowing constraints," Working Papers 15, Development and Policies Research Center (DEPOCEN), Vietnam.
  4. repec:hal:cesptp:halshs-00793530 is not listed on IDEAS
  5. Mitra, Tapan & Sorger, Gerhard, 2013. "On Ramseyʼs conjecture," Journal of Economic Theory, Elsevier, vol. 148(5), pages 1953-1976.
  6. Kirill Borissov & Ram Sewak Dubey, 2013. "A Characterization of Ramsey Equilibrium in a Model with Limited Borrowing," EUSP Deparment of Economics Working Paper Series Ec-08/13, European University at St. Petersburg, Department of Economics.

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