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Stochastic Optimal Growth with Risky Labor Supply

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  • Yiyong Cai

    ()

  • Takashi Kamihigashi

    ()

  • John Stachurski

    ()

Abstract

Production takes time, and labor supply and profit maximization decisions that relate to current production are typically made before all shocks affecting that production have been realized. In this paper we re-examine the problem of stochastic optimal growth with aggregate risk where the timing of the model conforms to this information structure. We provide a set of conditions under which the economy has a unique, nontrivial and stable stationary distribution. In addition, we verify key optimality properties in the presence of unbounded shocks and rewards, and provide the sample path laws necessary for consistent estimation and simulation.

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Bibliographic Info

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2012-585.

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Length: 29 Pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:acb:cbeeco:2012-585

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  1. Balbus, Łukasz & Reffett, Kevin & Woźny, Łukasz, 2012. "Stationary Markovian equilibrium in altruistic stochastic OLG models with limited commitment," Journal of Mathematical Economics, Elsevier, vol. 48(2), pages 115-132.
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  26. repec:hal:journl:halshs-00612131 is not listed on IDEAS
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Cited by:
  1. Takashi Kamihigashi, 2014. "Multiple Interior Steady States in the Ramsey Model with Elastic Labor Supply," Discussion Paper Series DP2014-31, Research Institute for Economics & Business Administration, Kobe University.
  2. Yiyong Cai & Takashi Kamihigashi & John Stachurski, 2012. "Stochastic Optimal Growth with Risky Labor Supply," Discussion Paper Series DP2012-24, Research Institute for Economics & Business Administration, Kobe University.

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