Abstract

http://ssrn.com/abstract=2178117
 


 



On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency


Robert A. Becker


Indiana University Bloomington - Department of Economics

Ram Sewak Dubey


Montclair State University - School of Business, Department of Economics and Finance

Tapan Mitra


Cornell University - Department of Economics

October 27, 2012

Economic Theory, Forthcoming
Center for Applied Economics and Policy Research (CAEPR) Working Paper No. 2012-007

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.

Number of Pages in PDF File: 30

Keywords: Cass Criteria, Efficiency, Maximal Income Monotonicity, Period Three Ramsey Equilibrium Cycle, Weak Turnpike Property, Approximate CES Function

JEL Classification: C61, D61, D90, O41

Accepted Paper Series


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Date posted: November 20, 2012 ; Last revised: July 29, 2013

Suggested Citation

Becker, Robert A. and Dubey, Ram Sewak and Mitra, Tapan, On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency (October 27, 2012). Economic Theory, Forthcoming; Center for Applied Economics and Policy Research (CAEPR) Working Paper No. 2012-007. Available at SSRN: http://ssrn.com/abstract=2178117 or http://dx.doi.org/10.2139/ssrn.2178117

Contact Information

Robert A. Becker (Contact Author)
Indiana University Bloomington - Department of Economics ( email )
Bloomington, IN 47405-6620
United States
Ram Sewak Dubey
Montclair State University - School of Business, Department of Economics and Finance ( email )
Upper Montclair, NJ 07043
United States
973-655-7778 (Phone)
973-655-7629 (Fax)
HOME PAGE: http://www.montclair.edu/~dubeyr
Tapan Mitra
Cornell University - Department of Economics ( email )
414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6283 (Phone)
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