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Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents

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.
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https://hal-amu.archives-ouvertes.fr/hal-01447873
Contributor : Patrice Cacciuttolo <>
Submitted on : Friday, January 27, 2017 - 12:15:29 PM
Last modification on : Wednesday, August 5, 2020 - 3:15:40 AM

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Kazuo Nishimura, Carine Nourry, Thomas Seegmuller, Alain Venditti. Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents. Macroeconomic Dynamics, 2016, 20 (02), pp.504--524. ⟨10.1017/S1365100514000078⟩. ⟨hal-01447873⟩

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