Hostname: page-component-6898cfcb55-w5hgh Total loading time: 0 Render date: 2026-11-11T10:12:47.791Z Has data issue: false hasContentIssue false

IS THERE A GOLDEN RULE FOR THE STOCHASTIC SOLOW GROWTH MODEL?

Published online by Cambridge University Press:  16 July 2002

Klaus Reiner Schenk–Hoppé
Affiliation:
Institute for Empirical Research in Economics, University of Zurich
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the 'Save PDF' action button.

This paper analyzes the dependence of average consumption on the saving rate in a one-sector neoclassical Solow growth model with production shocks and stochastic rates of population growth and depreciation where arbitrary ergodic processes are considered. We show that the long-run behavior of the stochastic capital intensity, and hence average consumption along any sample path, is uniquely determined by a random fixed point that depends continuously on the saving rate. This result enables us to prove the existence of a golden-rule saving rate that maximizes average consumption per capita. We also show that the golden-rule path is dynamically efficient. The results are illustrated numerically for Cobb–Douglas and CES production functions.

Information

Type
ARTICLES
Copyright
© 2002 Cambridge University Press