Stationary Equilibria in an Overlapping Generations Economy with Stochastic Production

Abstract

This paper generalizes the analyses of the existence, uniqueness, and stability of a non-trivial steady-state equilibrium in Galor and Ryder ( J. Econ. Theory 49 (1989), 360–375) to an overlapping generations economy with stochastic production. The study establishes sufficient conditions for the existence of a non-trivial stationary equilibrium as well as for the existence of a globally unique and stable non-trivial stationary equilibrium. It is shown that the existence of a non-trivial stationary equilibrium is not assured by conventional regularity conditions on the production function and preferences. Furthermore, multiplicity and indeterminacy of long-run equilibria appear to be commonplace. Journal of Economic Literature Classification Numbers: C62, E13, O41.