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Optimal growth path in an OLG economy without time-preference assumptions (full text)

Listed author(s):
  • Mohamed Mabrouk

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

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.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0510006.

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Length: 46 pages
Date of creation: 18 Oct 2005
Handle: RePEc:wpa:wuwpge:0510006
Note: Type of Document - pdf; pages: 46. This paper gives the detailed proofs of 'Optimal growth path in an OLG economy without time- preference assumptions: main results'
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