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An Analytical Construction Of Constantinides¿ Social Utility Function

Author

Listed:
  • Lilia Maliar

    () (Universidad de Alicante)

  • Serguei Maliar

    (Universidad de Alicante)

Abstract

This paper studies the properties of the social utility function defined by the planner's problem of Constantinides (1982). We show one set of restrictions on the optimal planner's policy rule, which is sufficient for constructing the social utility function analytically. For such well-known classes of utility functions as the HARA and the CES, our construction is equivalent to Gorman's (1953) aggregation. However, we can also construct the social utility function analytically in some cases when Gorman's (1953) representative consumer does not exist; in such cases, the social utility function depends on "heterogeneity" parameters. Our results can be used for simplifying the analysis of equilibrium in dynamic heterogeneous-agent models.

Suggested Citation

  • Lilia Maliar & Serguei Maliar, 2005. "An Analytical Construction Of Constantinides¿ Social Utility Function," Working Papers. Serie AD 2005-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2005-25
    as

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    References listed on IDEAS

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    Keywords

    Aggregation of preferences; Planner's problem; Social utility function; Social welfare; Gorman aggregation;

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