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On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency

  • Robert Becker

    ()

    (Indiana University)

  • Ram Sewak Dubey

    ()

    (Montclair State University)

  • Tapan Mitra

    ()

    (Cornell University)

We provide a sufficient condition on the production function under which eventually the most patient household owns the entire capital stock in every Ramsey Equilibrium, called the turnpike property. This generalizes the result in the literature which establishes the turnpike property using the capital income monotonicity condition. We then provide an example of a Ramsey Equilibrium in which the most patient household reaches a no capital position infinitely often. This is a strong refutation of the turnpike property on Ramsey equilibria. We also show that the constructed Ramsey equilibrium is inefficient in terms of the aggregate consumption stream that it provides.

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File URL: http://www.iub.edu/~caepr/RePEc/PDF/2012/CAEPR2012-007.pdf
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Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2012-007.

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Length: 30 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:inu:caeprp:2012-007
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  1. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2013. "On Existence and Bubbles of Ramsey Equilibrium with Borrowing Constraints," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00793530, HAL.
  2. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2013. "On existence, efficiency and bubbles of Ramsey equilibrium with borrowing constraints," Working Papers 2013-004, Department of Research, Ipag Business School.
  3. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
  4. Becker, Robert A & Boyd, John H, III & Foias, Ciprian, 1991. "The Existence of Ramsey Equilibrium," Econometrica, Econometric Society, vol. 59(2), pages 441-60, March.
  5. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
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