On Ramsey equilibrium: capital ownership pattern and inefficiency
Ram Dubey () and
Economic Theory, 2014, vol. 55, issue 3, 565-600
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. Copyright Springer-Verlag Berlin Heidelberg 2014
Keywords: Cass criteria; Efficiency; Maximal income monotonicity; Period three Ramsey equilibrium cycle; Weak turnpike property; Approximate CES function; C61; D61; D90; O41 (search for similar items in EconPapers)
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Working Paper: On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency (2012)
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