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Immiserizing Growth in Diamond's Overlapping Generations Model: A Geometrical Exposition

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  • Matsuyama, Kiminori

Abstract

The welfare analysis of P. A. Diamond's overlapping generations model is often restricted to a steady-state comparison. This paper demonstrates that a simple diagrammatic technique is useful for a Pareto welfare analysis. In particular, it shows that capital saving technological progress could make all generations (including those which level during the transition period) worse off whenever the economy is dynamic inefficient. On the other hand, technological progress always makes some generations better off when the economy is dynamic efficient. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Matsuyama, Kiminori, 1991. "Immiserizing Growth in Diamond's Overlapping Generations Model: A Geometrical Exposition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 251-262, February.
  • Handle: RePEc:ier:iecrev:v:32:y:1991:i:1:p:251-62
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    1. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-1011, Sept.-Oct.
    2. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
    3. Galor, Oded, 1988. "The Long-run Implications of a Hicks-Neutral Technical Progress," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 177-183, February.
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    Cited by:

    1. Kuhle, Wolfgang, 2012. "Dynamic efficiency and the two-part golden rule with heterogeneous agents," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 992-1006.
    2. Kuhle, Wolfgang, 2014. "The dynamics of utility in the neoclassical OLG model," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 81-86.
    3. Wolfgang Kuhle, 2012. "The Dynamics of Utility in the Neoclassical OLG Model," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_22, Max Planck Institute for Research on Collective Goods.
    4. Cremers, Emily T., 2006. "Dynamic efficiency in the two-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 1915-1936, November.
    5. Partha Sen, 2005. "Perfect Competition and the Keynesian Cross:Revisiting Tobin," Working papers 135, Centre for Development Economics, Delhi School of Economics.
    6. Partha Sen, 1996. "Asset Bubbles In A Monopolistic Competitive Macro Model," Working papers 39, Centre for Development Economics, Delhi School of Economics.

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