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

Center for Applied Economics and Policy Research Working Paper No. 2011-008

43 Pages Posted: 24 Sep 2011  

Robert A. Becker

Indiana University Bloomington - Department of Economics

Date Written: September 22, 2011

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 eventual monotone dynamics are demonstrated to govern the evolution of the economy's aggregate capital stock.

Keywords: Optimal Growth, Pareto Optimality, Symmetry, Twisted Turnpike Theorem, Monotone Dynamics

JEL Classification: C61, D51, D90, O41

Suggested Citation

Becker, Robert A., Optimal Growth with Heterogeneous Agents and the Twisted Turnpike: An Example (September 22, 2011). Center for Applied Economics and Policy Research Working Paper No. 2011-008. Available at SSRN: https://ssrn.com/abstract=1932827 or http://dx.doi.org/10.2139/ssrn.1932827

Robert A. Becker (Contact Author)

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

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