Wealth-In-Utility and Time-Consistent Growth: Real Excursions with an “Overlapping” Welfare Function

Ana Paula Martins

Turkish Economic Review, 2016, vol. 3, issue 1, 54-81

Abstract: This research explores the dynamic potential of point-wise utility functions optimization of representative agent economies. Such functions were generically considered to depend upon current consumption and wealth to be made available for next period usage or income generation, implying an endogenous (pseudo-)rate of time preference. At first inspection, the framework reproduced closely the dynamics and steady-state properties of the traditional Solow-Swan and Ramsey models – with population growth, exogenous technical progress, land, or increasing returns to scale - as well as, when human capital/knowledge was introduced, the Lucas-Uzawa endogenous growth set-up. General uncertainty – simulated at different decision stages - resulted in intuitively appealing solutions. Overlapping optimization of the capital stock generated forward-looking recursive dynamics. Homothetic preferences (CES or generalized Cobb-Douglas) - implying a constant consumption-(lead)wealth ratio along an optimal path and resulting in steady-state saving rates independent of CRS technologies features in simple structures -, were assumed for illustration, and also generic separable forms in the arguments. The latter were useful under uncertainty, allowing the inspection of the role of risk-aversion and diminishing marginal returns to capital in equilibrium and steady-state determination.

Keywords: Wealth-in-Utility (WIU); Capital-in-Utility (KIU); Overlapping Utility Functions; Consumption; Saving; Growth; Time (In)Consistency; Discounting; Rate of Time Preference; Growth under Uncertainty. (search for similar items in EconPapers)
JEL-codes: D11 D91 E19 O40 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.kspjournals.org/index.php/TER/article/download/680/723 (application/pdf)
http://www.kspjournals.org/index.php/TER/article/view/680 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ksp:journ2:v:3:y:2016:i:1:p:54-81

Access Statistics for this article

Turkish Economic Review is currently edited by Bilal KARGI

More articles in Turkish Economic Review from KSP Journals Istanbul, Turkey.
Bibliographic data for series maintained by Bilal KARGI ( this e-mail address is bad, please contact ).