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Can Heterogeneous Preferences Stabilize Endogenous Fluctuations?

Author

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  • Stefano Bosi

    () (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne, EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Thomas Seegmuller

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)

Abstract

While most of the literature concerned with indeterminacy and endogenous cycles is based on the restrictive assumption of a representative consumer,some recent contributions have investigated the role of heterogeneous agents in dynamics. This paper adds to this latter strand of the literature by highlighting the effects of heterogeneity in consumers' preferences within an overlapping generations economy with capital accumulation, endogenous labor supply and consumption in both periods. Using a mean-preserving approach to heterogeneity, we show that increasing the dispersion of propensity to save decreases macroeconomic volatility, by narrowing down the range of parameter values compatible with indeterminacy and ruling out expectations-driven fluctuations under a sufficiently large heterogeneity.

Suggested Citation

  • Stefano Bosi & Thomas Seegmuller, 2008. "Can Heterogeneous Preferences Stabilize Endogenous Fluctuations?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00266713, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00266713
    DOI: 10.1016/j.jedc.2007.03.002
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00266713
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    References listed on IDEAS

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    Cited by:

    1. Antoci, Angelo & Naimzada, Ahmad & Sodini, Mauro, 2009. "Strategic interactions and heterogeneity in a overlapping generations model with negative environmental externalities," MPRA Paper 18221, University Library of Munich, Germany.
    2. repec:mje:mjejnl:v:10:y:2014:i:2:p:49-61 is not listed on IDEAS
    3. Mohanad Ismael, 2010. "Progressive income taxes and macroeconomic instability," Documents de recherche 10-13, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    4. Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

    More about this item

    Keywords

    overlapping generations; Endogenous fluctuations; heterogeneous preferences; mean-preserving dispersion; overlapping generations.;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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