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Sustained Output Growth Under Uncertainty: A Simple Model With Human Capital

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Author Info
Dimitrios Varvarigos () (Dept of Economics, Loughborough University)
Abstract

In a model where agents use their labour/education choice to adjust their consumption profile over time, I show that the impact of uncertainty on growth depends, critically, on agents’ attitudes towards risk, reflected by the coefficient of relative risk aversion. In this respect, the well known result from the literature on ‘saving under uncertainty’ can be extended into a broader context, whereby the intertemporal profile of consumption is determined via human capital accumulation rather than saving and physical capital investment.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/DV_2007_20.pdf
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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_20.

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Date of creation: Aug 2007
Date of revision: Aug 2007
Handle: RePEc:lbo:lbowps:2007_20

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Related research
Keywords: Growth; Uncertainty;

Find related papers by JEL classification:
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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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.:
  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Mirman, Leonard J, 1971. "Uncertainty and Optimal Consumption Decisions," Econometrica, Econometric Society, vol. 39(1), pages 179-85, January. [Downloadable!] (restricted)
  3. Razin, Assaf, 1972. "Optimum Investment in Human Capital," Review of Economic Studies, Blackwell Publishing, vol. 39(4), pages 455-60, October. [Downloadable!] (restricted)
  4. Smith, R Todd, 1996. "Cyclical Uncertainty, Precautionary Saving and Economic Growth," Economica, London School of Economics and Political Science, vol. 63(251), pages 477-94, August. [Downloadable!] (restricted)
  5. Larry E. Jones & Rodolfo E. Manuelli & Henry E. Siu & Ennio Stacchetti, 2005. "Fluctuations in Convex Models of Endogenous Growth I: Growth Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 780-804, October. [Downloadable!] (restricted)
  6. Levhari, David & Srinivasan, T N, 1969. "Optimal Savings under Uncertainty," Review of Economic Studies, Blackwell Publishing, vol. 36(106), pages 153-63, April. [Downloadable!] (restricted)
  7. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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  1. Galindev, Ragchaasuren, 2007. "Uncertainty, learning and growth," MPRA Paper 7398, University Library of Munich, Germany, revised Jan 2008. [Downloadable!]
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