IDEAS home Printed from https://ideas.repec.org/p/hal/psewpa/halshs-00572510.html
   My bibliography  Save this paper

Optimal growth and the golden rule in a two-sector model of capital accumulation

Author

Listed:
  • Mehdi Senouci

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We contribute to the literature on optimal growth in two-sector models by solving a Ram- sey problem with a concave utility function. The unique possible steady-state is independent of initial conditions and of the instantaneous utility function, but not of the discount rate, and is characterized by a wage-rental ratio depending solely on the technology of the capital sector. For an initially low-capital economy, we show that the wage-rental ratio increasingly converges to its balanced value during transition. If the consumption sector is relatively capital-intensive, the relative price of capital increases during transition. If the investment sector is relatively more capital-intensive, it decreases. We also prove that a negative shock on the subjective rate of impatience, that makes the social planner more patient, leads to an immediate positive jump in asset prices.

Suggested Citation

  • Mehdi Senouci, 2011. "Optimal growth and the golden rule in a two-sector model of capital accumulation," PSE Working Papers halshs-00572510, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00572510
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00572510
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-00572510/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "1974," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 49-95, June.
      • Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
    2. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-1386, November.
    3. H. Uzawa, 1971. "On a Two-Sector Model of Economic Growth," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 3, pages 19-26, Palgrave Macmillan.
    4. Luca Gambetti & Jordi Galí, 2009. "On the Sources of the Great Moderation," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 26-57, January.
    5. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
    6. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    7. Cremers, Emily, 2006. "Dynamic Efficiency in the Two-Sector Overlapping Generations Model," Staff General Research Papers Archive 34856, Iowa State University, Department of Economics.
    8. Cremers, Emily T., 2006. "Dynamic efficiency in the two-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 1915-1936, November.
    9. Hirofumi Uzawa, 1964. "Optimal Growth in a Two-Sector Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 31(1), pages 1-24.
    10. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    11. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "How much of economic growth is fueled by investment-specific technological progress?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Mar.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," PSE Working Papers halshs-00589627, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," PSE Working Papers halshs-00589627, HAL.
    2. Michelacci, Claudio & Pijoan-Mas, Josep, 2016. "Labor supply with job assignment under balanced growth," Journal of Economic Theory, Elsevier, vol. 163(C), pages 110-140.
    3. repec:beo:journl:v:62:y:2018:i:216:p:7-34 is not listed on IDEAS
    4. Igor Fedotenkov, 2014. "Optimal asymmetric taxation in a two-sector model with population ageing," Bank of Lithuania Working Paper Series 15, Bank of Lithuania.
    5. Wei-Bin Zhang, 2015. "A Portfolio Equilibrium Model of Gold and Capital in an Integrated Walrasian General Equilibrium and Neoclassical Growth Theory," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(12), pages 616-627, December.
    6. Drugeon, Jean-Pierre & Nourry, Carine & Venditti, Alain, 2010. "On efficiency and local uniqueness in two-sector OLG economies," Mathematical Social Sciences, Elsevier, vol. 59(1), pages 120-144, January.
    7. Nourry, Carine & Venditti, Alain, 2011. "Local indeterminacy under dynamic efficiency in a two-sector overlapping generations economy," Journal of Mathematical Economics, Elsevier, vol. 47(2), pages 164-169, March.
    8. Wei-Bin Zhang, 2018. "Business Cycles In A General Equilibrium Dynamic Model With Land Value And Rent," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 63(216), pages 7-34, January –.
    9. Per Krusell & Anthony A. Smith Jr., 2015. "Is Piketty's "Second Law of Capitalism" Fundamental?," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 725-748.
    10. Wei-Bin Zhang, 2017. "Spatial Agglomeration And Economic Development With The Inclusion Of Interregional Tourism," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 62(213), pages 93-128, April - J.
    11. Lecocq, Franck & Shalizi, Zmarak, 2007. "How might climate change affect economic growth in developing countries ? a review of the growth literature with a climate lens," Policy Research Working Paper Series 4315, The World Bank.
    12. Wei-Bin ZHANG, 2015. "Tourism, Trade And Wealth Accumulation With Endogenous Income And Wealth Distribution Among Countries," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 4(1), pages 1-1, January.
    13. Zhang W.B., 2015. "Birth And Mortality Rates, Gender Division Of Labor, And Time Distribution In The Solow Growth Model," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 24(1), pages 121-134.
    14. Igor Fedotenkov, 2019. "Optimal asymmetric sector-specific labour taxation in an overlapping generations model," Journal of Economics, Springer, vol. 127(1), pages 1-18, June.
    15. Fukao Kyoji & Hamada Koichi, 1994. "International Trade and Investment under Different Rates of Time Preference," Journal of the Japanese and International Economies, Elsevier, vol. 8(1), pages 22-52, March.
    16. Molnárová, Zuzana & Reiter, Michael, 2022. "Technology, demand, and productivity: What an industry model tells us about business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    17. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    18. Karnit Flug & Zvi Hercowitz, 2000. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 461-485, July.
    19. Esteban Prieto & Sandra Eickmeier & Massimiliano Marcellino, 2016. "Time Variation in Macro‐Financial Linkages," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1215-1233, November.
    20. Zheng Liu & Daniel F. Waggoner & Tao Zha, 2009. "Sources of the Great Moderation: shocks, frictions, or monetary policy?," FRB Atlanta Working Paper 2009-03, Federal Reserve Bank of Atlanta.
    21. Fabrice Collard & Omar Licandro, 2020. "The neoclassical model and the welfare costs of selection," Discussion Papers 2020/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

    More about this item

    Keywords

    capital accumulation; optimal growth; golden rule; two-sector models;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:psewpa:halshs-00572510. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.