Local determinacy with non-separable utility

Citation metadata

Date: Feb. 2007
From: Journal of Economic Dynamics & Control(Vol. 31, Issue 2)
Publisher: Elsevier B.V.
Document Type: Author abstract
Length: 164 words
Lexile Measure: 60L

Document controls

Main content

Abstract :

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jedc.2006.01.002 Byline: Patrick A. Pintus Abstract: This paper introduces general formulations for both technology (with input substitution) and non-separable utility (compatible with balanced growth and stationary worked hours) into a benchmark RBC model. It is shown that intertemporal substitution and input substitutability lead to local determinacy and rule out stationary sunspot equilibria when labor demand is downward-sloping, in contrast with recent results obtained under the assumption of separable utility. The main intuition behind this result is shown to work as follows: in contrast with separable preferences, increasing the elasticity of intertemporal substitution in consumption necessarily implies decreasing the elasticity of constant-consumption labor supply, when utility is non-separable and concave, which affects unfavorably the occurrence of local indeterminacy. Author Affiliation: Departement of Economics, Universite de la Mediterranee, and GREQAM-IDEP Centre de la Vieille Charite, 2 rue de la Charite, 13236 Marseille Cedex 02, France Article History: Received 9 September 2004; Accepted 11 January 2006

Source Citation

Source Citation   

Gale Document Number: GALE|A161244417