An Obtrusive Remark On Capital And Comparative Statics
We present a simple comparative statics analysis of steady-state equilibria in overlapping generations economies with capital accumulation. We regard comparative statics as paradoxical whenever an exogenous increase in saving propensity induces a decrease (an increase) in consumption at the steady state when interest rate is positive (negative). It is shown that there is an exact relation between paradoxical comparative statics and a perverse intersection of properly identified curves of demand for and supply of capital in value. The demand curve for capital in value coincides with that of neo-Ricardian analysis. We relate our conclusions to some old and recent issues in capital theory. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd.
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Volume (Year): 60 (2009)
Issue (Month): 1 (02)
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