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Can heterogeneous preferences stabilize endogenous fluctuations?

Author

Listed:
  • Stefano Bosi

    (EQUIPPE et EPEE)

  • Thomas Seegmuller

    (Equipe Universitaire de Recherche en Economie Quantitative (EUREQua))

Abstract

While most of the literature concerned with indeterminacy and endogenous cycles is based on the questionable assumption of a representative consumer, some recent works have investigated the role of heterogeneous agents on dynamics. This paper adds a contribution to the debate, highlighting the effects of heterogeneity in consumers' preferences within an overlapping generations economy with capital accumulation, endogenous labor supply and consumption in both periods. Using a mean-preserving approach to heterogeneity, we show that increasing the dispersion of propensities to save turns out to stabilize the macroeconomic volatility, by reducing the range of parameters compatible with indeterminacy and ruling out expectations-driven fluctuations under a sufficiently large heterogeneity

Suggested Citation

  • Stefano Bosi & Thomas Seegmuller, 2006. "Can heterogeneous preferences stabilize endogenous fluctuations?," Cahiers de la Maison des Sciences Economiques v06082, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:v06082
    DOI: 10.1016/j.jedc.2007.03.002
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    File URL: https://halshs.archives-ouvertes.fr/halshs-00130200
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    References listed on IDEAS

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    Cited by:

    1. Emmanuelle Augeraud-Véron & Arnaud Ducrot, 2019. "Spatial externality and indeterminacy," Post-Print hal-02306568, HAL.
    2. Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics.
    3. Antoci, Angelo & Naimzada, Ahmad & Sodini, Mauro, 2009. "Strategic interactions and heterogeneity in a overlapping generations model with negative environmental externalities," MPRA Paper 18221, University Library of Munich, Germany.
    4. Mohanad Ismael, 2014. "Progressive income taxes and macroeconomic instability," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 10(2), pages 49-61.
    5. Mohanad Ismael, 2010. "Progressive income taxes and macroeconomic instability," Documents de recherche 10-13, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.

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    More about this item

    Keywords

    Endogenous fluctuations; heterogeneous preferences; mean-preserving dispersion; overlapping generations;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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