Deviant Generations, Ricardian Equivalence, and Growth Cycles
AbstractTwo equilibrium possibilities are known to obtain in a standard overlapping-generations model with dynastic preferences: either the altruistic bequest motive is operative for every generation (in which case, Ricardian equivalence obtains) or it is not, for any generation. Dynamic equilibria, where the bequest motive is occasionally operative, cannot emerge. This paper studies bequest-giving behavior and out-of-steady-state bequest and growth dynamics in a Ak model with intra- and intergenerational consumption externalities. These externalities, by their very presence, do not destroy Ricardian equivalence. They may, however, give rise to deviant generations -- generations that do not leave a bequest having received an inheritance, and vice versa -- and that seals the fate for Ricardian equivalence. Consumption externalities may also generate interesting indeterminacies and endogenous growth cycles that did not exist otherwise.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12939.
Date of creation: 18 May 2008
Date of revision:
Publication status: Forthcoming in Economic Theory
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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More information through EDIRC
growth cycles; overlapping generations; Ricardian equivalence; bequests; bequest motive;
Other versions of this item:
- Richard Barnett & Joydeep Bhattacharya & Helle Bunzel, 2013. "Deviant generations, Ricardian equivalence, and growth cycles," Economic Theory, Springer, vol. 52(1), pages 367-396, January.
- E00 - Macroeconomics and Monetary Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-24 (All new papers)
- NEP-DGE-2008-05-24 (Dynamic General Equilibrium)
- NEP-MAC-2008-05-24 (Macroeconomics)
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