Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-19T06:25:37.658Z Has data issue: false hasContentIssue false
  • English
  • Français

PARETO OPTIMALITY OF THE GOLDEN RULE EQUILIBRIUM IN AN OVERLAPPING GENERATIONS MODEL WITH PRODUCTION AND TRANSFERS

Published online by Cambridge University Press:  22 May 2015

Jean-François Mertens  and
Anna Rubinchik
Jean-François Mertens
Affiliation:
CORE, 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: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

The main result is that the golden rule equilibrium (GRE) is Pareto optimal (in the classical sense) in an overlapping generations (OG) model with constant-returns-to-scale production, transfers, arbitrary life-time productivity and homogeneous instantaneous felicity. In addition, we extend Cass and Yaari's equivalence between efficiency (aggregate consumption dominance) and present value dominance (with evaluation made using a candidate equilibrium price path).

Keywords

Infinite EconomiesOverlapping GenerationsExogenous GrowthGolden Rule Equilibrium
Type
Articles
Information
Macroeconomic Dynamics , Volume 19 , Issue 8 , December 2015 , pp. 1780 - 1799
Copyright
Copyright © Cambridge University Press 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Allais, M. (1947) Economie et intérêt. Paris: Imprimerie Nationale.Google Scholar
Balasko, Y. and Shell, K. (1980) The overlapping generations model, I. The case of pure exchange without money. Journal of Economic Theory 23 (3), 281–306.Google Scholar
Benveniste, L.M. (1986) Pricing optimal distributions to overlapping generations: A corollary to efficiency pricing. Review of Economic Studies 53 (2), 301–306.CrossRefGoogle Scholar
Benveniste, L. and Cass, D. (1986) On the existence of optimal stationary equilibria with a fixed supply of fiat money: I. The case of a single consumer. Journal of Political Economy 94, 402–417.CrossRefGoogle Scholar
Burke, Jonathan L. (1995) Existence of a Pareto-optimal equilibrium in nearly-stationary overlapping-generations economies. Economic Theory 5, 247–261.CrossRefGoogle Scholar
Burke, Jonathan L. (1999) The robustness of optimal equilibrium among overlapping generations. Economic Theory 14, 311–329.CrossRefGoogle Scholar
Cass, D. (1972) On capital overaccumulation in the aggregative, neoclassical model of economic growth: A complete characterization. Journal of Economic Theory 4 (2), 200–223.CrossRefGoogle Scholar
Cass, D. (1992) On the Existence of an Optimal Stationary Equilibrium with a Finite Supply of Fiat Money: II. The Case of Many Consumers with Arbitrary Lifetimes. Manuscript.Google Scholar
Cass, D., Okuno, M., and Zilcha, I. (1979) The role of money in supporting the Pareto optimality of competitive equilibrium in consumption-loan type models. Journal of Economic Theory 20, 41–80.CrossRefGoogle Scholar
Cass, D. and Yaari, M.E. (1967) Individual saving, aggregate capital accumulation, and efficient growth. In Shell, K. (ed.), Essays on the Theory of Optimal Economic Growth 20 (2), pp. 233–268. Cambridge, MA: MIT Press.Google Scholar
Dieudonné, J.A., Huet, D., and Julia, M.G. (1972) éléments d'analyse: Fondements de l'analyse moderne, Vol. 1. Paris: Gauthier-Villars.Google Scholar
Duc, Francois and Ghiglino, Christian (1998) Optimality of barter steady states. Journal of Economic Dynamics and Control 22, 1053–1067.CrossRefGoogle Scholar
Gale, David (1973) Pure exchange equilibrium of dynamic economic models. Journal of Economic Theory 6, 12–36.CrossRefGoogle Scholar
Ghiglino, C. and Tvede, M. (1995) No-trade and uniqueness of steady states. Journal of Economic Dynamics and Control 19 (3), 655–661.CrossRefGoogle Scholar
Malinvaud, E. (1953) Capital accumulation and efficient allocation of resources. Econometrica 21 (2), 233–268.CrossRefGoogle Scholar
Mertens, Jean-François and Rubinchik, Anna (2013) Equilibria in an overlapping generations model with transfer policies and exogenous growth. Economic Theory 54 (3), 537–595.CrossRefGoogle Scholar
Molina-Abraldes, Antonio and Pintos-Clapés, Juan (September 2008) Pareto optimality in continuous-time OLG economies. Journal of Mathematical Economics 44 (9–10), 933–950.CrossRefGoogle Scholar
Okuno, M. and Zilcha, I. (1983) Optimal steady-state in stationary consumption-loan type models. Journal of Economic Theory 31, 355–363.CrossRefGoogle Scholar
Samuelson, Paul A. (1958) An exact consumption-loan model of interest with or without the social contrivance of money. Journal of Political Economy 66 (6), 467–482.CrossRefGoogle Scholar
Yaari, Menahem E. (1964) On the consumer's lifetime allocation process. International Economic Review 5 (3), 304–317.CrossRefGoogle Scholar