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Optimal growth path in an OLG economy without time-preference assumptions (full text)

Mohamed Mabrouk ()

GE, Growth, Math methods from EconWPA

Abstract: The aim is to characterize optimal growth paths in an OLG economy where capital accumulation is achieved through bequests, without using the assumption of time preference theory on a social level, because such an assumption, that leads to use a discounted infinite horizon sum, introduce necessarily inequality between the different generations of the society. I investigated two optimality concepts: Pareto-optimality and consensual optimality. I considered the case without technical change. I found that all steady-state optimal growth paths converge necessarily to a level of capital where the marginal gain from a decrease of bequest is equal to the marginal loss from a similar decrease of heritage. With the use of an intergenerational altruistic utility, I showed that spontaneous equilibrium cannot be an optimal growth path unless generations feel (asymptotically) for their heirs as they feel for themselves.

Keywords: optimal growth; time-preference; egalitarianism; Pareto- optimality; golden-rule; OLG economy (search for similar items in EconPapers)
JEL-codes: C6 D5 D9 (search for similar items in EconPapers)
Date: 2005-10-18
Note: Type of Document - pdf; pages: 46. This paper gives the detailed proofs of 'Optimal growth path in an OLG economy without time- preference assumptions: main results'
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