On Ramsey equilibrium: Capital ownership pattern and inefficiency

Robert A. Becker, Ram Sewak Dubey, Tapan Mitra

Research output: Contribution to journalArticle

10 Citations (Scopus)

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

Fingerprint

Ownership
Ramsey equilibrium
Inefficiency
Turnpike
Household
Income
Monotonicity
Aggregate consumption
Production function
Capital stock

Keywords

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

Cite this

Becker, Robert A. ; Dubey, Ram Sewak ; Mitra, Tapan. / On Ramsey equilibrium : Capital ownership pattern and inefficiency. In: Economic Theory. 2014 ; Vol. 55, No. 3. pp. 565-600.
@article{e038fea3130547d68625a6d758c2f5b3,
title = "On Ramsey equilibrium: Capital ownership pattern and inefficiency",
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.",
keywords = "Approximate CES function, Cass criteria, Efficiency, Maximal income monotonicity, Period three Ramsey equilibrium cycle, Weak turnpike property",
author = "Becker, {Robert A.} and Dubey, {Ram Sewak} and Tapan Mitra",
year = "2014",
month = "1",
day = "1",
doi = "10.1007/s00199-013-0767-x",
language = "English",
volume = "55",
pages = "565--600",
journal = "Economic Theory",
issn = "0938-2259",
publisher = "Springer New York",
number = "3",

}

On Ramsey equilibrium : Capital ownership pattern and inefficiency. / Becker, Robert A.; Dubey, Ram Sewak; Mitra, Tapan.

In: Economic Theory, Vol. 55, No. 3, 01.01.2014, p. 565-600.

Research output: Contribution to journalArticle

TY - JOUR

T1 - On Ramsey equilibrium

T2 - Capital ownership pattern and inefficiency

AU - Becker, Robert A.

AU - Dubey, Ram Sewak

AU - Mitra, Tapan

PY - 2014/1/1

Y1 - 2014/1/1

N2 - 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.

AB - 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.

KW - Approximate CES function

KW - Cass criteria

KW - Efficiency

KW - Maximal income monotonicity

KW - Period three Ramsey equilibrium cycle

KW - Weak turnpike property

UR - http://www.scopus.com/inward/record.url?scp=84896393094&partnerID=8YFLogxK

U2 - 10.1007/s00199-013-0767-x

DO - 10.1007/s00199-013-0767-x

M3 - Article

AN - SCOPUS:84896393094

VL - 55

SP - 565

EP - 600

JO - Economic Theory

JF - Economic Theory

SN - 0938-2259

IS - 3

ER -