Abstract
This paper considers rational land and housing bubbles in an infinite-horizon general equilibrium model. Their demands rest on two different grounds: the land is an input to produce while the house may be consumed. Our work differs from the existing literature in two respects. First, dividends on both these long-lived assets are endogenous and their sequences are computed. Second, we introduce and study different concepts of bubbles, including individual and strong bubbles.
We are very grateful to the Referee for her/his remarks, comments, suggestions and questions. They have helped us to substantially improve our previous version. Ngoc-Sang Pham acknowledges the financial support of the LabEx MME-DII (ANR11-LBX-0023-01).
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Notes
- 1.
- 2.
- 3.
See the example in Sect. 9.3.2.
- 4.
See Remark 4.
- 5.
These conditions are satisfied if, for instance, \(\beta _{A}=\beta _{B}:=\beta \), \(A_{2t},B_{2t}<e_{B,2t}(1-\beta )/\left( 1+\beta \right) \) and \(A_{2t+1},B_{2t+1}<e_{A,2t+1}(1-\beta )/\left( 1+\beta \right) \) for any t.
- 6.
According to Tirole (1985), an allocation is efficient if it is not possible to improve the welfare of all generations (and, this, strictly for at least one of them).
- 7.
A Ramsey equilibrium is efficient if its capital path is efficient in the sense of Malinvaud.
- 8.
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Bosi, S., Le Van, C., Pham, NS. (2017). Rational Land and Housing Bubbles in Infinite-Horizon Economies. In: Nishimura, K., Venditti, A., Yannelis, N. (eds) Sunspots and Non-Linear Dynamics. Studies in Economic Theory, vol 31. Springer, Cham. https://doi.org/10.1007/978-3-319-44076-7_9
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