Advanced Search
MyIDEAS: Login to save this article or follow this journal

On the Invariance of the Rate of Return to Convex Adjustment Costs

Contents:

Author Info

  • Andrew B. Abel

    (Wharton School, University of Pennsylvania)

Abstract

The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitively-lived consumer, is invariant to the introduction of convex capital adjustment costs. Therefore, along balanced growth paths in neoclassical optimal growth models with an exogenous long-run growth rate of capital, the rate of return is invariant to the introduction of convex adjustment costs, though the capital-labor ratio is reduced along such paths. In AK models, convex adjustment costs reduce the growth rate and rate of return of capital. (Copyright: Elsevier)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://dx.doi.org/10.1006/redy.2001.0158
File Function: Full text
Download Restriction: Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 3 (July)
Pages: 586-601

as in new window
Handle: RePEc:red:issued:v:5:y:2002:i:3:p:586-601

Contact details of provider:
Postal: Review of Economic Dynamics Academic Press Editorial Office 525 "B" Street, Suite 1900 San Diego, CA 92101
Fax: 1-314-444-8731
Email:
Web page: http://www.EconomicDynamics.org/review.htm
More information through EDIRC

Order Information:
Email:
Web: http://www.EconomicDynamics.org/RED17.htm

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Marianne Baxter & Urban J. Jermann, 1999. "Household Production and the Excess Sensitivity of Consumption to Current Income," NBER Working Papers 7046, National Bureau of Economic Research, Inc.
  2. Andrew B. Abel, 2002. "The effects of a baby boom on stock prices and capital accumulation in the presence of Social Security," Working Papers 03-2, Federal Reserve Bank of Philadelphia.
  3. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, Econometric Society, vol. 39(5), pages 659-81, September.
  4. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 416-36, June.
  5. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 321.
  6. Basu, Parantap, 1987. "An Adjustment Cost Model of Asset Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 609-21, October.
  7. Abel, Andrew B & Blanchard, Olivier J, 1983. "An Intertemporal Model of Saving and Investment," Econometrica, Econometric Society, Econometric Society, vol. 51(3), pages 675-92, May.
  8. Edmond S. Phelps, 1964. "Second Essay on the Golden Rule of Accumulation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 173, Cowles Foundation for Research in Economics, Yale University.
  9. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(2), pages 257-275, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Michael C. Burda, 2006. "What kind of shock was it? Regional Integration and Structural Change in Germany after Unification," SFB 649 Discussion Papers SFB649DP2006-087, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. Bond, Stephen R. & Söderbom, Måns & Wu, Guiying, 2010. "Pursuing the Wrong Options? Adjustment Costs and the Relationship between Uncertainty and Capital Accumulation," Working Papers in Economics, University of Gothenburg, Department of Economics 449, University of Gothenburg, Department of Economics.
  3. Michael C. Burda, 2006. "Factor Reallocation in Eastern Germany after Reunification," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 368-374, May.
  4. Till Gross, 2013. "Capital Tax Competition and Dynamic Optimal Taxation," Carleton Economic Papers, Carleton University, Department of Economics 13-08, Carleton University, Department of Economics.
  5. Andrew B. Abel, 2003. "The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security," Econometrica, Econometric Society, Econometric Society, vol. 71(2), pages 551-578, March.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:red:issued:v:5:y:2002:i:3:p:586-601. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.