Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents

Kazuo Nishimura, Carine Nourry, Thomas Seegmuller and Alain Venditti

No 1314, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: We introduce public spending, financed through income taxation, in the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles through Hopf bifurcation and expectation-driven fluctuations appear if the degree of capital-labor substitution is large enough to be compatible with capital income monotonicity. Moreover, unlike frameworks with a representative agent, our results do not require externalities in production and are compatible with a weakly elastic labor supply with respect to wage.

Keywords: Endogenous cycles; indeterminacy; heterogeneous agents; public spending; endogenous labor supply; borrowing constraint. (search for similar items in EconPapers)
JEL-codes: C62 E32 H23 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-03, Revised 2013-02-08
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents (2023)
Journal Article: PUBLIC SPENDING AS A SOURCE OF ENDOGENOUS BUSINESS CYCLES IN A RAMSEY MODEL WITH MANY AGENTS (2016)
Working Paper: Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1314

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