Title

Deviant generations, Ricardian equivalence, and growth cycles

Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

1-2013

Journal or Book Title

Economic Theory

Volume

52

First Page or Article ID Number

367

Last Page

396

DOI

10.1007/s00199-011-0645-3

Abstract

Two equilibrium possibilities are known to obtain in a standard overlapping-generations model with dynastic preferences: either the altruistic bequest motive is operative for every generation (in which case, Ricardian equivalence obtains) or it is not, for any generation. Dynamic equilibria, where the bequest motive is occasionally operative, cannot emerge. This paper studies bequest-giving behavior and out-of-steady-state bequest and growth dynamics in a Ak model with intra- and intergenerational consumption externalities. These externalities, by their very presence, do not destroy Ricardian equivalence. They may, however, give rise to deviant generations — generations that do not leave a bequest having received an inheritance, and vice versa — and that seals the fate for Ricardian equivalence. Consumption externalities may also generate interesting indeterminacies and endogenous growth cycles that did not exist otherwise.

JEL Classification

E13, E32

Comments

This is a working paper of an article published as Barnett, R.C., Bhattacharya, J. & Bunzel, H. Deviant generations, Ricardian equivalence, and growth cycles. Econ Theory 52, 367–396 (2013). doi:10.1007/s00199-011-0645-3. Posted with permission.

Copyright Owner

Springer-Verlag

Language

en

File Format

application/pdf

Published Version

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