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

Mehdi Senouci

PSE Working Papers from HAL

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.

Keywords: capital accumulation; optimal growth; golden rule; two-sector models (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-dev, nep-dge, nep-fdg and nep-hrm
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00572510v1
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Citations: View citations in EconPapers (2)

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Working Paper: Optimal growth and the golden rule in a two-sector model of capital accumulation (2011)
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