Welfare effects of bubbles in an endogenous growth model |
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Authors: | Koichi Futagami Akihisa Shibata |
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Institution: | a Faculty of Economics, Osaka University, Machikaneyama, Toyonaka, Osaka, 560-0034, Japan;b KIER, Kyoto University, Yoshida, Sakyo-ku, Kyoto, 606-8501, Japan |
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Abstract: | This paper examines welfare effects of asset bubbles in an endogenous growth model with overlapping generations. In our model, a steady-state equilibrium with bubbles exists only if the presence of bubbles raises the welfare level of the initial generation. Bubbles can be beneficial to generations born at relatively early dates, whereas they reduce the welfare level of sufficiently distant future generations. Increasing the rate of supply of the useless asset improves the lifetime utilities of future generations. |
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Keywords: | Bubbles endogenous growth overlapping generations welfare analysis |
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