### Abstract

This paper considers a multi-agent one-sector Ramsey equilibrium growth model with borrowing constraints. The extreme borrowing constraint used in the classical version of the model, surveyed in Becker (2006), and the limited form of borrowing constraint examined in Borissov and Dubey (2015) are relaxed to allow more liberal borrowing by the households. A perfect foresight equilibrium is shown to exist in this economy. We describe the steady state equilibria for the liberal borrowing regime and show that as the borrowing regime is progressively liberalized, the steady state wealth inequality increases. Unlike the case of a limited borrowing regime, an equilibrium path need not converge in the case of liberal borrowing regime. We show through an example that a two period cyclic equilibrium exists when agents are allowed to borrow against their two period future wage income. This result is similar to the possibility of non-convergent equilibrium capital stock sequences in the model with no borrowing.

Original language | English |
---|---|

Pages (from-to) | 296-304 |

Number of pages | 9 |

Journal | Journal of Mathematical Economics |

Volume | 61 |

DOIs | |

State | Published - 1 Dec 2015 |

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### Keywords

- Existence
- Gini coefficient
- Growth
- Heterogeneous agents
- Liberal borrowing
- Turnpike property

### Cite this

*Journal of Mathematical Economics*,

*61*, 296-304. https://doi.org/10.1016/j.jmateco.2015.09.009

}

*Journal of Mathematical Economics*, vol. 61, pp. 296-304. https://doi.org/10.1016/j.jmateco.2015.09.009

**Ramsey equilibrium with liberal borrowing.** / Becker, Robert A.; Borissov, Kirill; Dubey, Ram.

Research output: Contribution to journal › Article › Research › peer-review

TY - JOUR

T1 - Ramsey equilibrium with liberal borrowing

AU - Becker, Robert A.

AU - Borissov, Kirill

AU - Dubey, Ram

PY - 2015/12/1

Y1 - 2015/12/1

N2 - This paper considers a multi-agent one-sector Ramsey equilibrium growth model with borrowing constraints. The extreme borrowing constraint used in the classical version of the model, surveyed in Becker (2006), and the limited form of borrowing constraint examined in Borissov and Dubey (2015) are relaxed to allow more liberal borrowing by the households. A perfect foresight equilibrium is shown to exist in this economy. We describe the steady state equilibria for the liberal borrowing regime and show that as the borrowing regime is progressively liberalized, the steady state wealth inequality increases. Unlike the case of a limited borrowing regime, an equilibrium path need not converge in the case of liberal borrowing regime. We show through an example that a two period cyclic equilibrium exists when agents are allowed to borrow against their two period future wage income. This result is similar to the possibility of non-convergent equilibrium capital stock sequences in the model with no borrowing.

AB - This paper considers a multi-agent one-sector Ramsey equilibrium growth model with borrowing constraints. The extreme borrowing constraint used in the classical version of the model, surveyed in Becker (2006), and the limited form of borrowing constraint examined in Borissov and Dubey (2015) are relaxed to allow more liberal borrowing by the households. A perfect foresight equilibrium is shown to exist in this economy. We describe the steady state equilibria for the liberal borrowing regime and show that as the borrowing regime is progressively liberalized, the steady state wealth inequality increases. Unlike the case of a limited borrowing regime, an equilibrium path need not converge in the case of liberal borrowing regime. We show through an example that a two period cyclic equilibrium exists when agents are allowed to borrow against their two period future wage income. This result is similar to the possibility of non-convergent equilibrium capital stock sequences in the model with no borrowing.

KW - Existence

KW - Gini coefficient

KW - Growth

KW - Heterogeneous agents

KW - Liberal borrowing

KW - Turnpike property

UR - http://www.scopus.com/inward/record.url?scp=84948752124&partnerID=8YFLogxK

U2 - 10.1016/j.jmateco.2015.09.009

DO - 10.1016/j.jmateco.2015.09.009

M3 - Article

VL - 61

SP - 296

EP - 304

JO - Journal of Mathematical Economics

JF - Journal of Mathematical Economics

SN - 0304-4068

ER -