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Economic Growth and Welfare in a Simple Neoclassical OLG Model with Minimum Wage and Consumption Taxes support

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  • Luciano Fanti
  • Luca Spataro

Abstract

In this paper we show that the neoclassical standard OLG growth model, under low substitution in preferences and technology, may generate three stable steady states. In particular we show the richness of the dynamical roles played by the intertemporal substitution parameter. The novelty of our work is that a three stable equilibria world may exist, which allows to reinterpret in a new light the evidence of three groups of countries: underdeveloped, developing and developed. Our theoretical results may have far-reaching implications on the debate on convergence, on the corresponding growth empirics and on the policies for escaping from poverty traps.

Suggested Citation

  • Luciano Fanti & Luca Spataro, 2007. "Economic Growth and Welfare in a Simple Neoclassical OLG Model with Minimum Wage and Consumption Taxes support," Discussion Papers 2007/67, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2007/67
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2007-67.pdf
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    Cited by:

    1. Fanti, Luciano & Gori, Luca, 2010. "Child policy solutions for the unemployment problem," Economics Letters, Elsevier, vol. 109(3), pages 147-149, December.
    2. Luciano Fanti & Luca Gori, 2009. "Longevity, fertility and PAYG pension systems sustainability," Discussion Papers 2009/77, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Luciano Fanti & Luca Gori, 2012. "Endogenous Lifetime in an Overlapping-Generations Small Open Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 68(2), pages 121-152, June.
    4. Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, vol. 103(1), pages 59-82, May.
    5. Manuela Gussoni & Andrea Mangani, 2012. "The Impact of Public Funding for Innovation on Firms' R&D Investments: Do R&D Cooperation and Appropriability Matter?," L'industria, Società editrice il Mulino, issue 2, pages 237-254.
    6. Luciano Fanti & Luca Gori, 2007. "Fertility, income and welfare in an OLG model with regulated wages," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(4), pages 405-427, December.
    7. Lorenzo Corsini & Pier Mario Pacini & Luca Spataro, 2010. "Workers' Choice on Pension Schemes: an Assessment of the Italian TFR Reform Through Theory and Simulations," Discussion Papers 2010/96, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    8. Lorenzo Corsini & Elisabetta Olivieri, 2008. "Technological Change and the Wage Differential between Skilled and Unskilled Workers: Evidence from Italy," Discussion Papers 2008/73, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    9. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    10. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Luciano Fanti & Luca Gori, 2008. "PAYG pensions and economic cycles: exogenous versus endogenous fertility," Discussion Papers 2008/75, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

    More about this item

    Keywords

    poverty traps; elasticity of substitution; OLG model;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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