TY  - JOUR
AU  - Yanagawa,Noriyuki
AU  - Grossman,Gene M.
TI  - Asset Bubbles and Endogenous Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4004
PY  - 1992
Y2  - February 1992
UR  - http://www.nber.org/papers/w4004
L1  - http://www.nber.org/papers/w4004.pdf
N1  - Author contact info:
Noriyuki Yanagawa
University of Tokyo
Department of Economics
Bunkyo-ku 113
Tokyo, JAPAN
E-Mail: yanagawa@e.u-tokyo.ac.jp

Gene M. Grossman
International Economics Section
Department of Economics
Princeton University
Princeton, NJ 08544
Tel: 609/258-4823
Fax: 609/258-1374
E-Mail: grossman@princeton.edu
AB  - We study the interaction between productive and nonproductive savings in an economy that grows in the long run due to endogenous improvements in labor productivity. As in the neoclassical growth setting with overlapping generations studied by Tirole (1985), asset bubbles can exist in an economy with endogenous growth provided they are not too large and that the growth rate in the equilibrium without bubbles exceeds the interest rate. Since the growth rate in the bubble-less equilibrium is endogenous, the existence condition reflects parameters of tastes and technology. We find that bubbles, when they exist, retard the growth of the economy, perhaps even in the long run, and reduce the welfare of all generations born after the bubble appears.
ER  -