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Optimal growth path in an OLG economy without time-preference assumptions : main results

Author

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  • Mohamed Mabrouk

    (Ecole Superieure de Statistique et d'Analyse de l'Information de Tunis)

Abstract

The aim is to characterize optimal growth paths in an OLG economy where capital accumulation is achieved through bequests, without using the assumption of time preference theory on a social level, because such an assumption, that leads to use a discounted infinite horizon sum, introduce necessarily inequality between the different generations of the society. I investigated two optimality concepts: Pareto-optimality and consensual optimality. I considered the case without technical change. I found that all steady-state optimal growth paths converge necessarily to a level of capital where the marginal gain from a decrease of bequest is equal to the marginal loss from a similar decrease of heritage. With the use of an intergenerational altruistic utility, I showed that spontaneous equilibrium cannot be an optimal growth path unless generations feel (asymptotically) for their heirs as they feel for themselves.

Suggested Citation

  • Mohamed Mabrouk, 2005. "Optimal growth path in an OLG economy without time-preference assumptions : main results," GE, Growth, Math methods 0505004, EconWPA.
  • Handle: RePEc:wpa:wuwpge:0505004
    Note: Type of Document - pdf; pages: 19. 19 pages
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ge/papers/0505/0505004.pdf
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    More about this item

    Keywords

    optimal growth; OLG economy; time-preference assumption; Pareto-optimality; egalitarianism; golden rule;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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