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  • Kazuo Nishimura (a1), Carine Nourry (a2), Thomas Seegmuller (a3) and Alain Venditti (a4)


We introduce public spending, financed through income taxation, into the Ramsey model with heterogeneous agents. Public spending as a source of welfare generates more complex dynamics. In contrast to previous contributions focusing on similar models but with wasteful public spending, limit cycles through Hopf bifurcation and expectation-driven fluctuations appear if the degree of capital–labor substitution is high enough to be compatible with capital income monotonicity. Moreover, unlike frameworks with a representative agent, our results do not require externalities in production and are compatible with a weakly elastic labor supply with respect to wage.


Corresponding author

Address correspondence to: Kazuo Nishimura, Institute of Economic Research, Kyoto University, Yoshidahonmachi, Sakyoku, Kyoto 606-8501, Japan; e-mail:


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Macroeconomic Dynamics
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  • EISSN: 1469-8056
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