Published in
Economic Theory 43 (1), 2010, pages 1-21
Summary
We analyze infinite-horizon choice functions within the setting of a simple technology. Efficiency and time consistency are characterized by stationary consumption and inheritance functions, as well as a transversality condition. In addition, we consider the equity axioms Suppes–Sen, Pigou–Dalton, and resource monotonicity. We show that Suppes–Sen and Pigou–Dalton imply that the consumption and inheritance functions are monotone with respect to time—thus justifying sustainability—while resource monotonicity implies that the consumption and inheritance functions are monotone with respect to the resource. Examples illustrate the characterization results.