On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency

Economic Theory, Forthcoming

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

30 Pages Posted: 20 Nov 2012 Last revised: 29 Jul 2013

Robert A. Becker

Indiana University Bloomington - Department of Economics

Ram Sewak Dubey

Montclair State University - The Feliciano School of Business, Department of Economics

Tapan Mitra

Cornell University - Department of Economics

Date Written: October 27, 2012

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

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: https://ssrn.com/abstract=2178117 or http://dx.doi.org/10.2139/ssrn.2178117

Robert A. Becker (Contact Author)

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Ram Sewak Dubey

Montclair State University - The Feliciano School of Business, Department of Economics ( email )

553, Feliciano School of Business,
1 Normal Ave
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)

Paper statistics

Downloads
16
Abstract Views
344