The possibility of sunspot equilibria and endogenous cycles are explored in a two-sector overlapping-generations model with entry. It is shown that if prospective entrants act oligopolistically as producers but competitively as consumers then a strategic complementarity between the entry decisions of agents across sectors and across time may arise. If the complementarity is sufficiently strong, the economy will have multiple, Pareto-ranked steady states. Stationary sunspot equilibria can then be constructed as a randomization between allocations in the neighbourhood of the multiple steady states providing a source of aggregate fluctuations.

In this paper, the authors present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth. The authors use simple functional forms for preferences, technologies, and income distribution to highlight the distinction between economies with public education and those with private education. The authors find that income inequality declines more quickly under public education. On the other hand, private education yields greater per capita incomes unless the initial income inequality is sufficiently high. The authors also find that societies will choose public education if a majority of agents have incomes below average. Copyright 1992 by University of Chicago Press.