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Thibault, Emmanuel
(2016)
Demonstration Effect and Dynamic Efficiency.
TSE Working Paper, n. 16-616, Toulouse
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Abstract
We show that contrary to conventional wisdom intergenerational family transfers dominate fiscal policies as a remedy to the dynamic inefficiency arising in a Diamond (1965, American Economic Review) economy with logarithmic utility and Cobb-Douglas technology. Using the demonstration-effect approach popularized by Cox and Stark (2005, Journal of Public Economics), we prove that, differently from public debt, family transfers can serve the role of automatic stabilizers. Indeed, they are nil under dynamic efficiency, implying that both capital accumulation and welfare are not worsened. They are positive under dynamic inefficiency, and instrumental to depress capital accumulation so to approach the Golden Rule capital stock.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | January 2016 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | OLG model, Dynamic efficiency, Intergenerational family transfers |
| JEL Classification: | C62 - Existence and Stability Conditions of Equilibrium D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving O41 - One, Two, and Multisector Growth Models |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 07 Jun 2016 07:55 |
| Last Modified: | 02 Apr 2021 15:50 |
| OAI Identifier: | oai:tse-fr.eu:30012 |
| URI: | https://publications.ut-capitole.fr/id/eprint/19309 |
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