Optimal growth path in an OLG economy without time-preference assumptions : main results
AbstractThe aim is to characterize optimal growth paths in an OLG economy where capital accumulation is achieved through bequests, without using the assumption of time preference theory on a social level, because such an assumption, that leads to use a discounted infinite horizon sum, introduce necessarily inequality between the different generations of the society. I investigated two optimality concepts: Pareto-optimality and consensual optimality. I considered the case without technical change. I found that all steady-state optimal growth paths converge necessarily to a level of capital where the marginal gain from a decrease of bequest is equal to the marginal loss from a similar decrease of heritage. With the use of an intergenerational altruistic utility, I showed that spontaneous equilibrium cannot be an optimal growth path unless generations feel (asymptotically) for their heirs as they feel for themselves.
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Bibliographic InfoPaper provided by EconWPA in its series GE, Growth, Math methods with number 0505004.
Length: 19 pages
Date of creation: 19 May 2005
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Note: Type of Document - pdf; pages: 19. 19 pages
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optimal growth; OLG economy; time-preference assumption; Pareto-optimality; egalitarianism; golden rule;
Find related papers by JEL classification:
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- D9 - Microeconomics - - Intertemporal Choice
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-23 (All new papers)
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