RESWITCHING OF TECHNIQUES IN AN INTERTEMPORAL EQUILIBRIUM MODEL WITH OVERLAPPING GENERATIONS

We study an overlapping generation model of Diamond’s type. In contrast to Diamond, we do not assume that the technology can be represented by an aggregate neoclassical production function. Rather, we study the case in which (i) the technology consists of a finite number of constant coefficient productive activities, (ii) there are capital goods physically heterogeneous with respect to each other and to the economy’s only consumption good and (iii) there are two alternative production methods for obtaining the consumption good. We explore the possible linkage between reswitching of techniques and the multiplicity of stationary state equilibria of the model.