Existence of competitive equilibrium in a non-optimal one-sector economy without conditions on the distorted marginal product of capital

This paper develops a method for proving the existence of competitive equilibrium in a distorted/non-optimal one-sector economy–a discrete time variant of the Romer model–without conditions on the equilibrium value of the marginal product of capital. Existence is obtained under weaker conditions than in Le Van et al. (2002). Moreover, we provide an existence result for an economy with a regressive tax studied in Santos (2002). The proofs rely on ideas of Becker and Boyd (1997).

► This papers develops a method for proving the existence of equilibrium in a non-optimal one-sector economy. ► No conditions on the equilibrium value of the marginal product of capital are used. ► Existence is obtained under weaker conditions than in Le Van et al. (2002). ► An existence result for an economy with a regressive tax studied in Santos (2002) is also established. ► Proofs rely on ideas of Becker and Boyd (1997).