SUSTAINABLE HETEROGENEITY IN EXOGENOUS GROWTH MODELS. THE SOCIALLY OPTIMAL DISTRIBUTION BY GOVERNMENT’S INTERVENTION

  • Taiji HARASHIMA

Abstract

This paper examines the socially optimal allocation by focusing not on the social welfare function but
instead on the utility possibility frontier in exogenous growth models with a heterogeneous population. A unique
balanced growth path was found on which all of the optimality conditions of all heterogeneous households are
equally and indefinitely satisfied (sustainable heterogeneity). With appropriate government interventions, such a
path is always achievable and is uniquely socially optimal for almost all generally usable (i.e., preferences are
complete, transitive, and continuous) social welfare functions. The only exceptions are some variants in
Nietzsche type social welfare functions, but those types of welfare functions will rarely be adopted in democratic
societies. This result indicates that it is no longer necessary to specify the shape of the social welfare function to
determine the socially optimal growth path in a heterogeneous population.
Published
2016-10-20
How to Cite
HARASHIMA, Taiji . SUSTAINABLE HETEROGENEITY IN EXOGENOUS GROWTH MODELS. THE SOCIALLY OPTIMAL DISTRIBUTION BY GOVERNMENT’S INTERVENTION. Theoretical and Practical Research in the Economic Fields, [S.l.], v. 5, n. 1, p. 73-100, oct. 2016. ISSN 2068-7710. Available at: <https://journals.aserspublishing.eu/tpref/article/view/274>. Date accessed: 05 july 2022.
Section
Theoretical and Practical Research in the Economic Fields