Details

Related name

• National Bureau of Economic Research [Browse]

Series

• Working Paper Series (National Bureau of Economic Research) no. w8635. [More in this series]
• NBER working paper series no. w8635

Summary note

The Modified Golden Rule, which relates the rate of return on capital and the growth rate of the capital stock along long-run growth paths that maximize the utility of a representative infinitely-lived consumer, is invariant to the introduction of convex capital adjustment costs. Therefore, along balanced growth paths in neoclassical optimal growth models with an exogenous long-run growth rate of capital, the rate of return is invariant to the introduction of convex adjustment costs, though the capital-labor ratio is reduced along such paths. In AK models, convex adjustment costs reduce the growth rate and rate of return on capital.

Notes

December 2001.

Source of description

Print version record

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