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Can heterogeneous preferences stabilize endogenous fluctuations ?

Stefano Bosi () and Thomas Seegmuller ()
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Stefano Bosi: EQUIPPE et EPEE

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: While most of the literature concerned with indeterminacy and endogenous cycles is based on the questionable assumption of a representative consumer, some recent works have investigated the role of heterogeneous agents on dynamics. This paper adds a contribution to the debate, highlighting the effects of heterogeneity in consumers' preferences within an overlapping generations economy with capital accumulation, endogenous labor supply and consumption in both periods. Using a mean-preserving approach to heterogeneity, we show that increasing the dispersion of propensities to save turns out to stabilize the macroeconomic volatility, by reducing the range of parameters compatible with indeterminacy and ruling out expectations-driven fluctuations under a sufficiently large heterogeneity.

Keywords: Endogenous fluctuations; heterogeneous preferences; mean-preserving dispersion; overlapping generations. (search for similar items in EconPapers)
JEL-codes: C62 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2006-12
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ftp://mse.univ-paris1.fr/pub/mse/cahiers2006/V06082.pdf (application/pdf)

Related works:
Journal Article: Can heterogeneous preferences stabilize endogenous fluctuations (2008) Downloads
Working Paper: Can Heterogeneous Preferences Stabilize Endogenous Fluctuations? (2008) Downloads
Working Paper: Can heterogeneous preferences stabilize endogenous fluctuations ? (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:v06082

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