Genuine Saving under Stochastic Growth

Chuan-Zhong Li () and Löfgren, Karl-Gustaf ()
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Löfgren, Karl-Gustaf: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 779, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The concept of genuine saving appeared for the first time in a proof of a now well known theorem in Weitzman (1976). It was reinvented and used as a local welfare indicator by Pearce and Atkinson (1993). The purpose of this paper is to generalize this welfare measure to a stochastic Brownian motion context. We will use a stochastic version of a growth model introduced by Ramsey (1928). The particular model was developed by Merton (1975). Although the model is simple, it is enough to understand what its welfare results will look like in a general case.

Keywords: Welfare measures under growth and uncertainty; diversified risk versus undiversified risk (search for similar items in EconPapers)
JEL-codes: D60 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2009-08-13
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