Fig. 16

Possible oversaving in the model—“derivative” of utility with respect to capital for the initial and final steady states, partial equilibrium. Note: The graphs illustrate local changes in the utility of the representative agent under partial equilibrium. The results at the intersection of the horizontal and vertical lines represent our general equilibrium result. Subsequently, we locally vary the aggregate capital per effective labor from 99 to 101 % of the general equilibrium level and have the agent solve her problem under the resulting prices. Note that in the case of the DC system with \(\bar {J}=41\), utility is locally decreasing with capital, which is a sign of oversaving on aggregate, as the agent would benefit if the general equilibrium level of capital per effective labor was lower. a DB system, \(\bar {J}=41\). b DB system, \(\bar {J}=47\). c DC system, \(\bar {J}=41\). d DC system, \(\bar {J}=47\)