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A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System


  • Galor, Oded


This paper develops a two-sector overlapping-generations model. It characterizes the dynamical system globally and establishes sufficient conditions for the existence of a globally unique perfect-foresight equilibrium. It provides, therefore, a useful framework for global dynamic analysis of phenomena whose modeling requires a multidimensional commodity space. The analysis demonstrates that gross substitutability in consumption is not sufficient for the determinacy of equilibrium in this production economy. However, if in addition the investment good is capital intensive and second period consumption of two-period-lived individuals is a normal good, then the perfect-foresight equilibrium is globally unique. Copyright 1992 by The Econometric Society.

Suggested Citation

  • Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-1386, November.
  • Handle: RePEc:ecm:emetrp:v:60:y:1992:i:6:p:1351-86

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    References listed on IDEAS

    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
    3. Richard Blundell & James L. Powell, 2001. "Endogeneity in nonparametric and semiparametric regression models," CeMMAP working papers CWP09/01, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    4. Richard W. Blundell & Martin Browning & Ian A. Crawford, 2003. "Nonparametric Engel Curves and Revealed Preference," Econometrica, Econometric Society, vol. 71(1), pages 205-240, January.
    5. Arthur Lewbel, 2001. "Demand Systems with and without Errors," American Economic Review, American Economic Association, vol. 91(3), pages 611-618, June.
    6. Whitney K. Newey & James L. Powell & Francis Vella, 1999. "Nonparametric Estimation of Triangular Simultaneous Equations Models," Econometrica, Econometric Society, vol. 67(3), pages 565-604, May.
    7. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
    8. Afriat, S N, 1973. "On a System of Inequalities in Demand Analysis: An Extension of the Classical Method," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 460-472, June.
    9. Banks, James & Blundell, Richard & Lewbel, Arthur, 1996. "Tax Reform and Welfare Measurement: Do We Need Demand System Estimation?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1227-1241, September.
    10. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-730, May.
    11. Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-999, September.
    12. Whitney K. Newey & James L. Powell, 2003. "Instrumental Variable Estimation of Nonparametric Models," Econometrica, Econometric Society, vol. 71(5), pages 1565-1578, September.
    13. Richard Blundell & Alan Duncan, 1998. "Kernel Regression in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 62-87.
    14. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    15. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
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