Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents

Kazuo Nishimura, Carine Nourry, Thomas Seegmuller and Alain Venditti

Abstract: We introduce public spending, financed through income taxation, in the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles through Hopf bifurcation and expectation-driven fluctuations appear if the degree of capital-labor substitution is large enough to be compatible with capital income monotonicity. Moreover, unlike frameworks with a representative agent, our results do not require externalities in production and are compatible with a weakly elastic labor supply with respect to wage.

Keywords: indeterminacy; endogenous cycles; heterogeneous agents; public spending; endogenous labor supply; borrowing constraint (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-dge and nep-mac
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00796698
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Related works:
Working Paper: Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents (2023)
Journal Article: PUBLIC SPENDING AS A SOURCE OF ENDOGENOUS BUSINESS CYCLES IN A RAMSEY MODEL WITH MANY AGENTS (2016)
Working Paper: Public Spending as a Source of Endogenous Business Cycles in a Ramsey Model with Many Agents (2013)
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