Regularity And Stability Of Equilibria In An Overlapping Generations Growth Model

In an exogenous-growth economy with overlapping generations, the Cobb–Douglas production, any positive life-cycle productivity, and time-separable constant elasticity of substitution (CES) utility, we analyze local stability of a balanced growth equilibrium (BGE) with respect to changes in consumption endowments, which could be interpreted as a transfer policy. We show that generically, in the space of parameters, equilibria around a BGE are locally unique and are locally differentiable functions of endowments, with derivatives given by kernels. Furthermore, those equilibria are stable in the sense that the effects of temporary changes decay exponentially toward ±∞.