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
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Thomas Seegmuller: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: We introduce public spending, financed through income taxation, into 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 high 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; Economie quantitative (search for similar items in EconPapers)
Date: 2023-12-13
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-01447873v1
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Related works:
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)
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:hal:wpaper:hal-01447873

DOI: 10.1017/S1365100514000078

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