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Stochastic optimal growth with risky labor supply

  • Cai, Yiyong
  • Kamihigashi, Takashi
  • Stachurski, John

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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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 50 (2014)
Issue (Month): C ()
Pages: 167-176

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Handle: RePEc:eee:mateco:v:50:y:2014:i:c:p:167-176
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  6. Cai, Yiyong & Kamihigashi, Takashi & Stachurski, John, 2014. "Stochastic optimal growth with risky labor supply," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 167-176.
  7. Stachurski, John, 2002. "Stochastic Optimal Growth with Unbounded Shock," Journal of Economic Theory, Elsevier, vol. 106(1), pages 40-65, September.
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