On Ramsey equilibrium: Capital ownership pattern and inefficiency

Robert A. Becker, Ram Sewak Dubey, Tapan Mitra

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

We provide a sufficient condition on the production function under which eventually the most patient household owns the entire capital stock in every Ramsey equilibrium, called the turnpike property. This generalizes the result in the literature which establishes the turnpike property using the capital income monotonicity condition. We then provide an example of a Ramsey equilibrium in which the most patient household reaches a no capital position infinitely often. This is a strong refutation of the turnpike property on Ramsey equilibria. We also show that the constructed Ramsey equilibrium is inefficient in terms of the aggregate consumption stream that it provides.

Original languageEnglish
Pages (from-to)565-600
Number of pages36
JournalEconomic Theory
Volume55
Issue number3
DOIs
StatePublished - 1 Jan 2014

Keywords

  • Approximate CES function
  • Cass criteria
  • Efficiency
  • Maximal income monotonicity
  • Period three Ramsey equilibrium cycle
  • Weak turnpike property

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