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On Ramsey Equilibrium: Capital Ownership Pattern and Inefficiency

Robert Becker, Ram Dubey () and Tapan Mitra

No 2012-007, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: 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.

Pages: 30 pages
Date: 2012-11
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Journal Article: On Ramsey equilibrium: capital ownership pattern and inefficiency (2014) Downloads
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