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REGULARITY AND STABILITY OF EQUILIBRIA IN AN OVERLAPPING GENERATIONS GROWTH MODEL

Published online by Cambridge University Press:  17 July 2017

Jean-François Mertens and
Anna Rubinchik
Jean-François Mertens
Affiliation:
Université Catholique de Louvain
Anna Rubinchik*
Affiliation:
University of Haifa
*
Address correspondence to: Anna Rubinchik, Department of Economics, University of Haifa, Mount Carmel, Haifa 31905, Israel; e-mail: arubinchik@econ.haifa.ac.il
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Abstract

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In an exogenous-growth economy with overlapping generations, the Cobb–Douglas production, any positive life-cycle productivity, and time-separable constant elasticity of substitution (CES) utility, we analyze local stability of a balanced growth equilibrium (BGE) with respect to changes in consumption endowments, which could be interpreted as a transfer policy. We show that generically, in the space of parameters, equilibria around a BGE are locally unique and are locally differentiable functions of endowments, with derivatives given by kernels. Furthermore, those equilibria are stable in the sense that the effects of temporary changes decay exponentially toward ±∞.

Keywords

Regularity of Infinite EconomiesPolicy EvaluationOverlapping GenerationsExogenous Growth

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 2 , March 2019, pp. 699 - 729
Copyright
Copyright © Cambridge University Press 2017 

Footnotes

We would like to thank the Center for Rationality in Jerusalem for its hospitality; A. Gorokhovsky for many useful references; K. Arrow, Cl. d'Aspremont, S. Spear for their comments; and participants of PET'08, SED'08, NBER General Equilibrium Conference in Iowa and Economic Theory Conference in Lawrence, KS, European General Equilibrium Conference at Warwick, Conference in honor of E. Kalai in Jerusalem, as well as the seminar participants at Boulder, Brussels, Cornell, Haifa, Northwestern, Roma, Salerno, Stony-Brook, UPenn, Yale and the “Séminaire de Jeux” in Paris.

This paper presents research results of the Belgian Program on Interuniversity Pôles of Attraction initiated by the Belgian State, Prime Minister's Office, Science Policy Programming. The paper has been substantially revised since the first author passed away. The scientific responsibility is assumed by the second author.

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