This paper provides a simplified version of the perfectly flexible wages OLG model proposed by Hahn and Solow (1995). Using a Cobb-Douglas specification for the utility and the production functions, we demonstrate that the local stability of the steady-state equilibrium depends only on intertemporal preferences and distributive shares. Furthermore, we show that local stability might be related to consumption smoothing considerations.
Intertemporal Preferences, Distributive Shares, and Local Dynamics
GUERRAZZI, MARCO
2004-01-01
Abstract
This paper provides a simplified version of the perfectly flexible wages OLG model proposed by Hahn and Solow (1995). Using a Cobb-Douglas specification for the utility and the production functions, we demonstrate that the local stability of the steady-state equilibrium depends only on intertemporal preferences and distributive shares. Furthermore, we show that local stability might be related to consumption smoothing considerations.
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