AN OBTRUSIVE REMARK ON CAPITAL AND COMPARATIVE STATICS

Gaetano Bloise and Pietro Reichlin

Metroeconomica, 2009, vol. 60, issue 1, 54-76

Abstract: We present a simple comparative statics analysis of steady‐state equilibria in overlapping generations economies with capital accumulation. We regard comparative statics as paradoxical whenever an exogenous increase in saving propensity induces a decrease (an increase) in consumption at the steady state when interest rate is positive (negative). It is shown that there is an exact relation between paradoxical comparative statics and a perverse intersection of properly identified curves of demand for and supply of capital in value. The demand curve for capital in value coincides with that of neo‐Ricardian analysis. We relate our conclusions to some old and recent issues in capital theory.

Date: 2009
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https://doi.org/10.1111/j.1467-999X.2008.00318.x

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