Keynes-Ramsey Rule and its Implications in a Two-Sector Optimal Growth Model

Haruo Kataoka and Hiroaki Hashimoto ()
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Haruo Kataoka: Meisei University
Hiroaki Hashimoto: Asia University

No 8, Discussion Papers from Meisei University, School of Economics

Abstract: We expand Ramsey's bliss model into a discounted two-sector one under production externalities and homogeneity of relevant functions. By adopting a point transformation which transforms all of the variables except time, we can readily demonstrate that the transformed two-sector model has an invariance equation which is considered as an extended form of the well-known Ramsey rule in his bliss model. We then derive an explicit solution to our two-sector model by the extensive use of the invariance equation under some mild conditions.

Keywords: Keynes-Ramsey rule; point transformation; homogeneity; externality; Hamiltonian (search for similar items in EconPapers)
JEL-codes: C61 D60 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2008-01
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Citations: View citations in EconPapers (2)

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