Endogenous public policy and multiple equilibria

Gerhard Glomm, B. Ravikumar

Research output: Contribution to journalArticle

22 Citations (Scopus)

Abstract

One of the well known roles of public policy in models with indeterminacy is to reduce the set of equilibria. However, agents' expectations regarding future policy may be self fulfilling when public policy is endogenized. We show that a simple overlapping generations economy with public education may yield multiple equilibria. Under a laissez-faire system, our model has a unique equilibrium. Thus, the presence of public policy may generate, rather than eliminate, multiple equilibria.

Original languageEnglish (US)
Pages (from-to)653-662
Number of pages10
JournalEuropean Journal of Political Economy
Volume11
Issue number4
DOIs
StatePublished - Apr 1996
Externally publishedYes

Fingerprint

public policy
future expectation
public education
system model
economy
Multiple equilibria
Public policy
Overlapping generations
System model
Indeterminacy
Public education
Laissez-faire

Keywords

  • Multiple equilibria
  • Public policy

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Endogenous public policy and multiple equilibria. / Glomm, Gerhard; Ravikumar, B.

In: European Journal of Political Economy, Vol. 11, No. 4, 04.1996, p. 653-662.

Research output: Contribution to journalArticle

Glomm, Gerhard ; Ravikumar, B. / Endogenous public policy and multiple equilibria. In: European Journal of Political Economy. 1996 ; Vol. 11, No. 4. pp. 653-662.
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