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On Ramsey Equilibrium: Capital Ownership Pattern and InefficiencyRobert A. BeckerIndiana University Bloomington Ram Sewak DubeyMontclair State University - School of Business, Department of Economics and Finance Tapan MitraCornell University - Department of Economics October 27, 2012 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.
Keywords: Cass Criteria, Efficiency, Maximal Income Monotonicity, Period Three Ramsey Equilibrium Cycle, Weak Turnpike Property, Approximate CES Function JEL Classification: C61, D61, D90, O41 working papers seriesDate posted: November 20, 2012 ; Last revised: December 1, 2012Suggested CitationContact Information
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