AN OBTRUSIVE REMARK ON CAPITAL AND COMPARATIVE STATICS

ABSTRACT We present a simple comparative statics analysis of steady‐state equilibria in overlapping generations economies with capital accumulation. We regard comparative statics as paradoxical whenever an exogenous increase in saving propensity induces a decrease (an increase) in consumption at the...

Full description

Saved in:
Bibliographic Details
Published in:Metroeconomica 2009-02, Vol.60 (1), p.54-76
Main Authors: Bloise, Gaetano, Reichlin, Pietro
Format: Article
Language:English
Subjects:
Capital
Capital theory
Comparative analysis
Demand curves
Economic theory
Equilibrium models
Interest rates
Macroeconomics
Overlapping-generations model
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:ABSTRACT We present a simple comparative statics analysis of steady‐state equilibria in overlapping generations economies with capital accumulation. We regard comparative statics as paradoxical whenever an exogenous increase in saving propensity induces a decrease (an increase) in consumption at the steady state when interest rate is positive (negative). It is shown that there is an exact relation between paradoxical comparative statics and a perverse intersection of properly identified curves of demand for and supply of capital in value. The demand curve for capital in value coincides with that of neo‐Ricardian analysis. We relate our conclusions to some old and recent issues in capital theory.
ISSN:0026-1386
1467-999X
DOI:10.1111/j.1467-999X.2008.00318.x