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Optimal growth and the golden rule in a two-sector model of capital accumulation

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  • Mehdi Senouci

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

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    Abstract

    We contribute to the literature on optimal growth in two-sector models by solving a Ram- sey 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, we 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. We also prove that a negative shock on the subjective rate of impatience, that makes the social planner more patient, leads to an immediate positive jump in asset prices.

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    File URL: http://halshs.archives-ouvertes.fr/docs/00/57/25/10/PDF/wp201109.pdf
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    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number halshs-00572510.

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    Date of creation: Feb 2011
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    Handle: RePEc:hal:wpaper:halshs-00572510

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00572510
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    Related research

    Keywords: capital accumulation ; optimal growth ; golden rule ; two-sector models;

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    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February.
    2. Cremers, Emily T., 2006. "Dynamic efficiency in the two-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 1915-1936, November.
    3. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
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    Cited by:
    1. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," Working Papers halshs-00589627, HAL.

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