Extension of the Model to an Infinite Horizon

Thorsten Hens and Sabine Elmiger
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Thorsten Hens: University of Zurich
Sabine Elmiger: University of Zurich

Chapter 5 in Economic Foundations for Finance, 2019, pp 47-78 from Springer

Abstract: Abstract The model with capital from Chap. 4 has a number of plausible properties, but there is still room for improvement. For example an undesirable feature of the model is that consumption and output per capita fall over time with population growth. This is due to the fact that the total amount of capital was initially given. However, if we extend the model to multiple time periods, it is possible to balance population growth with a higher savings rate and thereby to hold the stock of capital per capita constant over time.

Date: 2019
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DOI: 10.1007/978-3-030-05427-4_5

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