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Optimal Growth And The Golden Rule In A Two-Sector Model Of Capital Accumulation

The authors contribute to the literature on optimal growth in two-sector models by solving a Ramsey problem with a concave utility function. The unique possible steady-state is independent of initial conditions and of the instantaneous utility function, but not of the discount rate, and is characterized by a wage-rental ratio depending solely on the technology of the capital sector. For an initially low-capital economy, they show that the wage-rental ratio increasingly converges to its balanced value during transition. If the consumption sector is relatively capital-intensive, the relative price of capital increases during transition. If the investment sector is relatively more capital-intensive, it decreases.

Provided by: Paris-Jourdan Sciences Economiques Topic: Big Data Date Added: Mar 2011 Format: PDF

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