On Ramsey's Conjecture: Efficient Allocations in the Neoclassical Growth Model with Private Information

Espino, Emilio (May 2004) On Ramsey's Conjecture: Efficient Allocations in the Neoclassical Growth Model with Private Information. IHS Economics Series 154

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Abstract: In his seminal paper of 1928, Ramsey conjectured that if agents discounted the future differently, in the long run all agents except the most patient would live at the subsistence level. The validity of this conjecture was investigated in different environments. In particular, it has been confirmed in the neoclassical growth model with dynamically complete markets. This paper studies this conjecture in a version of this model that includes private information and heterogeneous agents.A version of Bayesian Implementation is introduced and a recursive formulation of the original allocation problem is established. Efficient allocations are renegotiation-proof and the expected utility of any agent cannot go to zero with positive probability if the economy does not collapse. If the economy collapses all agents will get zero consumption forever. Thus, including any degree of private information in the neoclassical growth model will deny Ramsey's conjecture, if efficient allocations are considered.;

Item Type: IHS Series
Keywords: 'Dynamic contracts' 'Capital accumulation' 'Private information'
Classification Codes (e.g. JEL): C610, D82, D90, D610, D310
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 26 Jul 2017 09:53
URI: http://irihs.ihs.ac.at/id/eprint/1564

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