Optimality of the competitive equilibrium in the Uzawa-Lucas model with sector-specific externalities

Abstract

In this paper, we show that the competitive equilibrium is optimal in the Uzawa-Lucas model with sector-specific externalities associated to human capital in the goods sector. Thus, these external effects do not provoke a market failure and do not provide a rationale for government intervention. Copyright Springer-Verlag Berlin/Heidelberg 2004Endogenous growth, Externalities, Efficiency.,

Existence of a competitive equilibrium in the Lucas (1988) model without physical capital

“…Remark that Gomez (2004) obtains the same result for the Uzawa (1965), Lucas (1988) model with human and physical capitals. Then, we derive our main result: (v) an equilibrium is a C 2 -competitive equilibrium if the production function is globally not too convex and only if the human capital technology is a strictly concave function of the schooling effort.…”

Decentralized Allocation of Human Capital and Nonlinear Growth

“…Other work on the UzawaLucas model stresses particular features like the role of fiscal policy in guaranteeing an optimal decentralized equilibrium [García-Castrillo and Sanso (2000), Gómez (2003Gómez ( , 2005] and the efficiency of the competitive equilibrium under sector specific externalities associated to human capital in the goods sector [Gómez (2004[Gómez ( , 2006]. An additional note goes to the work of Restrepo-Ochoa and Vázquez (2004), who adopt a stochastic version of the two-sector model in order to compare results on fluctuations with the benchmark Real Business Cycles setup.…”

Optimal taxation in the Uzawa–Lucas model with externality in human capital

“…We perform our analysis in a representative agent in…nite horizon model with general utility and production functions. Nevertheless, a discrete version of the model allows us to present an analytical solution for a certain combination 1 Just to mention for example Caballé and Santos (1993), Chamley (1993), Mulligan and Sala-i-Martin (1993), Benhabib and Perli (1994), García-Castrillo and Sanso (2000), Ben-Gad (2003), Gómez (2003), Gómez (2004), Bethmann (2007), among many others.…”