Pareto-Optima for a Generalized Ramsey Model

Abstract

We consider a Ramsey model with several households with heterogeneous preferences who are able to borrow capital to each other. Since the capital constraints of one household then depends on the others' capital, one can no longer optimize each household's welfare individually. This problem formulation leads to a Pareto optimization problem. We consider existence and first order optimality conditions as well as some numerical results.