In this paper we study the long run growth property of overlapping generations models. It is shown that in one sector models with convex technologies the asymptotic growth rate must be zero. This results because the young do not have sufficient income to purchase a large capital stock. Thus, a policy of income redistribution to the young can generate growth even if financed by income taxation. Additionaly, it is shown that two sector models and one sector models with nonconvex technologies are consistent with growth.
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* This paper was originally presented at the conference on Investment Aspects of Growth, SUNY Buffalo, May 1990. The comments of the participants and our discussant Sergio Rebelo, as well as those of two anonymous referees, were very valuable. We thank Lars Hansen, Hugo Hopenhayen, and Nancy Stokey for useful discussion and the National Science Foundation and a Stanford Graduate School of Business Faculty Fellowschip Fund for financial support. Charles Goldman providid expert research assistance, and Leslie Reinborn pointed out some mistakes in an earlier version. Remaining errors are ours.
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