By David de la Croix, Philippe Michel
Inter-generational transfers are on the heart of financial coverage debates this present day. lowering public debt; financing social safety; taxing capital and bequests; and designing the schooling approach suggest huge inter-generational transfers. The software that economists hire to research those matters is the overlapping generations version, which displays the various classes of lifestyles. whilst the version contains capital accumulation, it additionally permits researchers to formalize the improvement of an financial system, bearing on its development route to the discounts habit of younger brokers. the purpose of this booklet is an in-depth research of this version that incorporates its significant coverage implications.
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Extra info for A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations
One important difference is that the dynamics of myopic foresight are not monotonic under the assumption H3, which will allow us to discuss other types of time paths. With the assumption of myopic foresight, Ret+1 = Rt = f (kt ). Competitive Equilibria 41 The inter-temporal equilibrium with initial capital stock k0 is unique, and it is characterized by the dynamics of kt : kt+1 = 1 s(ω(kt ), f (kt )) ≡ m(kt ). 22) Under the assumptions H1 and H2, m(k) is deﬁned and continuously differentiable on R++ with values in R++ .
The function g(k) is increasing and non-negative. As a bounded and monotonic function on R++ admits a limit, there exists a limit of g(k) when k > 0 goes to 0 and this limit is non-negative: g(0+) = lim k→0, k>0 g(k) ≥ 0. 20) are deﬁned on R+ . 4 (Steady state) ¯ = k. 20) if g( k) particular value k¯ = 0, when g(0) = 0, we say that 0 is a corner steady state. 20). 20) if and only if ω(0) = 0, or equivalently, if and only if f (0) = 0. (savProof: Assume ω(0) = 0. Then, for k > 0, the inequality 0 < g(k) < ω(k) 1+n ings lower than wage) implies g(0) = 0.
More generally, the two-sector overlapping generations model is an important framework of analysis for issues that require the existence of more than one sector of production. Recently, there have been a large number of applications of this model directed at a more comprehensive study of international trade and growth. Some recent applications of this framework include Mountford (1998) and (1999) and Cremers (2001). 4 A Quick Look at the Empirics of Growth A Long-Run Perspective on Savings. One fundamental characteristic of the model developed above is that savings (of the young) drive capital accumulation, and hence medium-run growth.
A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations by David de la Croix, Philippe Michel