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Existence of competitive equilibrium in a non-optimal one-sector economy without conditions on the distorted marginal product of capital

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  • Crettez, Bertrand
  • Morhaim, Lisa

Abstract

This paper develops a method for proving the existence of competitive equilibrium in a distorted/non-optimal one-sector economy–a discrete time variant of the Romer model–without conditions on the equilibrium value of the marginal product of capital. Existence is obtained under weaker conditions than in Le Van et al. (2002). Moreover, we provide an existence result for an economy with a regressive tax studied in Santos (2002). The proofs rely on ideas of Becker and Boyd (1997).

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  • Crettez, Bertrand & Morhaim, Lisa, 2012. "Existence of competitive equilibrium in a non-optimal one-sector economy without conditions on the distorted marginal product of capital," Mathematical Social Sciences, Elsevier, vol. 63(3), pages 197-206.
    • Handle: RePEc:eee:matsoc:v:63:y:2012:i:3:p:197-206
    DOI: 10.1016/j.mathsocsci.2011.11.002
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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Morand, Olivier F. & Reffett, Kevin L., 2003. "Existence and uniqueness of equilibrium in nonoptimal unbounded infinite horizon economies," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1351-1373, September.
    3. Datta, Manjira & Mirman, Leonard J. & Reffett, Kevin L., 2002. "Existence and Uniqueness of Equilibrium in Distorted Dynamic Economies with Capital and Labor," Journal of Economic Theory, Elsevier, vol. 103(2), pages 377-410, April.
    4. Junjian Miao & Manuel Santos, 2005. "Numerical Solution of Dynamic Non-Optimal Economies," Boston University - Department of Economics - Working Papers Series WP2005-003, Boston University - Department of Economics.
    5. Greenwood Jeremy & Huffman Gregory W., 1995. "On the Existence of Nonoptimal Equilibria in Dynamic Stochastic Economies," Journal of Economic Theory, Elsevier, vol. 65(2), pages 611-623, April.
    6. Lisa Morhaim & Charles-Henri Dimaria & Cuong Le Van, 2002. "The discrete time version of the Romer model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(1), pages 133-158.
    7. Erol, Selman & Le Van, Cuong & Saglam, Cagri, 2011. "Existence, optimality and dynamics of equilibria with endogenous time preference," Journal of Mathematical Economics, Elsevier, vol. 47(2), pages 170-179, March.
    8. Zhigang Feng & Jianjun Miao & Adrian Peralta‐Alva & Manuel S. Santos, 2014. "Numerical Simulation Of Nonoptimal Dynamic Equilibrium Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(1), pages 83-110, February.
    9. Mirman, Leonard J. & Morand, Olivier F. & Reffett, Kevin L., 2008. "A qualitative approach to Markovian equilibrium in infinite horizon economies with capital," Journal of Economic Theory, Elsevier, vol. 139(1), pages 75-98, March.
    10. Santos, Manuel S., 2002. "On Non-existence of Markov Equilibria in Competitive-Market Economies," Journal of Economic Theory, Elsevier, vol. 105(1), pages 73-98, July.
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    12. Becker, Robert A & Boyd, John H, III & Foias, Ciprian, 1991. "The Existence of Ramsey Equilibrium," Econometrica, Econometric Society, vol. 59(2), pages 441-460, March.
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