Optimal Growth with Heterogeneous Agents and the Twisted Turnpike: An Example

Robert Becker

No 2011-008, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: The dynamics of a welfare maximizing, heterogeneous agent, one sector optimal Ramsey model is analyzed assuming two agents, each with a distinct discount factor and log utility. Production is Cobb-Douglas. Explicit time varying policy functions are derived, one for each period. A Twisted Turnpike Property and eventually monotone dynamics are demonstrated to govern the evolution of the economy’s aggregate capital stock.

Pages: 43 pages
Date: 2011-09
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Journal Article: Optimal growth with heterogeneous agents and the twisted turnpike: An example (2012)
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