THE IMPACT OF CAPITAL AND INCOME RISK ON LONG-RUN GROWTH

Christiane Clemens

No 212, Computing in Economics and Finance 2000 from Society for Computational Economics

Abstract: The paper analyzes the effects of individual--specific and economy--wide productivity shocks on intertemporal decision--making of risk averse agents. We focus especially on the consequences for long--run growth. By contrasting the most widely used models of modern growth theory, namely the AK-model and the learning by doing-model, it is shown that not only the degree of risk aversion but also the source of income as measured by the factor income distribution is crucial for the impact of the stochastic disturbances. In the presence of a pure capital risk, growth and welfare effects are different from those arising when agents are subject to capital and income risk.

Date: 2000-07-05
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf0:212

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