Overlapping Families of Infinitely-Lived Agents
Résumé
This paper develops a model in which new and infinitely-linked dynasties, which are, by definition, not linked to pre-existing families through operative intergenerational transfers, continuously enter the economy over time. This model of infinitely-lived families possesses most of the properties characteristic of standard overlapping generation frameworks: competitive equilibria can be inefficient, bubbles may exist, and Ricardian neutrality does not in general hold. Contrary to a widespread but erroneous belief, the terms ‘infinite horizon model’ and ‘representative agent model’ are, therefore, not interchangeable.