AN ANALYTICAL CONSTRUCTION OF CONSTANTINIDES¿ SOCIAL UTILITY FUNCTION

Lilia Maliar and Serguei Maliar

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: This paper studies the properties of the social utility function defined by the planner's problem of Constantinides (1982). We show one set of restrictions on the optimal planner's policy rule, which is sufficient for constructing the social utility function analytically. For such well-known classes of utility functions as the HARA and the CES, our construction is equivalent to Gorman's (1953) aggregation. However, we can also construct the social utility function analytically in some cases when Gorman's (1953) representative consumer does not exist; in such cases, the social utility function depends on "heterogeneity" parameters. Our results can be used for simplifying the analysis of equilibrium in dynamic heterogeneous-agent models.

Keywords: Aggregation of preferences; Planner's problem; Social utility function; Social welfare; Gorman aggregation (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-09
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2005-25

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