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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Is there a Golden Rule for the Stochastic Solow Growth Model? |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 33 |
| ISSN | 1424-0459 |
| Date | 2000 |
| Abstract Text | This paper analyzes the dependence of average consumption on the saving rate in a one-sector neoclassical Solow growth model with production shocks and stochastic rates of population growth and depreciation where arbitrary ergodic processes are considered. The long-run behavior of the stochastic capital intensity and hence average consumption is uniquely determined by a random fixed point which depends continuously on the saving rate. We prove existence of a golden rule saving rate maximizing average consumption per capita. A dynamic inefficiency result is given to ascertain the importance of the golden rule for the stochastic Solow model. The cases of Cobb-Douglas and CES production function are analyzed numerically, revealing that shocks to either parameter can lead to higher average consumption at the golden rule saving rate. |
| Official URL | http://www.econ.uzh.ch/wp.html |
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