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Stochastic Optimal Growth with Risky Labor Supply

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Listed author(s):
  • 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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File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp585.pdf
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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
Handle: RePEc:acb:cbeeco:2012-585
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Find related papers by JEL classification:
  • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
  • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
  • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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Cited by:

  1. 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.
  2. Takashi Kamihigashi, 2015. "Multiple interior steady states in the Ramsey model with elastic labor supply," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(1), pages 25-37, 03.
  3. Takashi Kamihigashi & John Stachurski, 2014. "Stability Analysis for Random Dynamical Systems in Economics," Discussion Paper Series DP2014-35, Research Institute for Economics & Business Administration, Kobe University.

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