Optimal growth when tastes are inherited

David de la Croix and Philippe Michel

No 1997012, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We address the issue of optimal growth when standard-of-living aspirations are transmitted from one generation to the next. We derive the condition for the optimal solution to be stable in the saddle-point sense and show that this optimal solution may display damped oscillations even when the planner does not discount the utility of future generations (golden rule case). The decentralization of the optimal solution aims at correcting the inter-generational externality by use of an investment subsidy and allows to avoid socially damaging rushes on consumption in expansion periods. It also allows to stabilize output in the case of competitive economies displaying endogenous fluctuations.

Keywords: Externality; saddle-point stability; golden rule; oscillations; investment subsidy; stabilisation (search for similar items in EconPapers)
JEL-codes: E32 O41 (search for similar items in EconPapers)
Pages: 16
Date: 1997-03-01, Revised 1997-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://sites.uclouvain.be/econ/DP/IRES/9712.pdf (application/pdf)

Related works:
Journal Article: Optimal growth when tastes are inherited (1999)
Working Paper: Optimal Growth When Tastes Are Inherited (1997)
Working Paper: Optimal Growth when Tastes are Inherited (1997)
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:ctl:louvir:1997012

Access Statistics for this paper

More papers in LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().