A Three-period Samuelson-Diamond Growth

Niels Blomgren-Hansen
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Niels Blomgren-Hansen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

No 15-2005, Working Papers from Copenhagen Business School, Department of Economics

Abstract: Samuelson (1958) analyses a three-period model, whereas Diamod (1965) considers a two-period model. This difference poses the question whether the insights derived by analysing the simple two-period model carry over in the more complicated three-period case. They do. The Samuelson model (no productive capital) has only one positive solution (r = n); however, this root is unstable. The Diamond model (no nonproductive abode of purchasing power) has also only one positive solution; the root is stable but inefficient. In a model with both productive capital and a non-productive abode of purchasing power, the inefficient Diamond solution becomes unstable and the socially optimal solution becomes stable.

Keywords: None (search for similar items in EconPapers)
JEL-codes: H00 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2005-11-13
New Economics Papers: this item is included in nep-dge
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