Transcription of Chapter 3 The Neoclassical Growth Model
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Chapter 3 The Neoclassical Growth Model
Chapter 3. The Neoclassical Growth Model 75. Economic Growth : Lecture Notes In the Solow Model , agents in the economy (or the dictator) follow a simplistic linear rule for con . sumption and investment. In the Ramsey Model , agents (or the dictator) choose consumption and investment optimally so as to maximize their individual utility (or social welfare). The Social Planner In this section, we start the analysis of the Neoclassical Growth Model by considering the optimal plan of a benevolent social planner, who chooses the static and intertemporal allocation of resources in the economy so as to maximize social welfare.
G.M. Angeletos • Given kt, ct and lt enter only the period t utility and resource constraint; (ct,lt) thus appears only in Ht. Similarly, kt,enter only the period t and t + 1 utility and resource constraints; they thus appear only in Ht and Ht+1. Lemma 9 If {ct,lt,kt+1}∞ is the optimum and {λt}∞ the associated multipliers, then t=0 t=0 Ht (ct,lt) = arg max H(kt,kt+1, c, l, λt)
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