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THE BEHAVIOR OF THE SAVING RATE IN THE NEOCLASSICAL OPTIMAL GROWTH MODEL

Published online by Cambridge University Press:  23 June 2010

Anastasia Litina  and
Theodore Palivos
Anastasia Litina
Affiliation:
University of Macedonia
Theodore Palivos*
Affiliation:
University of Macedonia and Rimini Center for Economic Analysis
*
Address correspondence to: Theodore Palivos, Department of Economics, University of Macedonia, 156 Egnatia Street, GR-540 06 Salonica, Greece; e-mail: [email protected].
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Abstract

This paper characterizes the saving rate in the Ramsey–Cass–Koopmans model analytically with a general production function when there exist both exogenous and endogenous growth. It points out conditions involving the share of capital and the elasticities of factor and intertemporal substitution under which the saving rate path to its steady-state value exhibits overshooting or undershooting or is monotonic. Simulations illustrate these interesting dynamics. The paper also identifies the general class of production functions that render the saving rate constant along the entire transition path and hence make the Ramsey–Cass–Koopmans model isomorphic to that of Solow and Swan.

Keywords

Ramsey–Cass–Koopmans ModelSaving RateElasticities of Substitution
Type
Articles
Information
Macroeconomic Dynamics , Volume 14 , Issue 4 , September 2010 , pp. 482 - 500
Copyright
Copyright © Cambridge University Press 2010

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