On equilibrium elasticities of substitution in simple overlapping generations economies with heterogeneous goods

Jean-Paul Barinci (), Hye-Jin Cho () and Jean-Pierre Drugeon ()
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Jean-Paul Barinci: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay
Hye-Jin Cho: Sciences Po - Sciences Po
Jean-Pierre Drugeon: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This contribution1 introduces a sectoral supply functions approach of equilibrium dynamics in the context of a simple model of overlapping generations with heterogeneous goods. The class of preferences that is here considered hinges upon an endogenous leisure motive and an elementary savings behaviour, that comes as a simpler alternative to the Diamond tradition in the benchmark contributions about the properties of overlapping generations economies with two industries. The presence of some institution making possible intergenerational transfers is shown to influence both the equilibrium aggregate factors shares and elasticity of substitution along a stationary equilibrium. Both Wealth-to-Capital and Golden Rule steady state equilibria being considered, the economies are categorised, either as Samuelsonian or classical, according to the sign of the transfers between generations at the Golden Rule steady state. The local stability properties of the various types of equilibria are successively investigated, the elasticities of substitution between the two inputs being emphasised to play a key-role for that purpose. Interestingly, the smoothing properties of factors substitution and their respective contribution to the obtention of the local uniqueness property may differ between the Samuelsonian and classical economies.

Keywords: Overlapping generations; Wealth-to-Capital and Golden Rule equilibria; Heterogeneous goods; Samuelsonian and classical economies; Equilibrium elasticities of substitution (search for similar items in EconPapers)
Date: 2021
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03238950v1
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Citations: View citations in EconPapers (1)

Published in Mathematical Social Sciences, 2021, 112, pp.120-137. ⟨10.1016/j.mathsocsci.2021.03.012⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03238950

DOI: 10.1016/j.mathsocsci.2021.03.012

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