Sustained positive consumption in a model of stochastic growth: The role of risk aversion

• 成果类型: Article
• 署名作者: Mitra, Tapan; Roy, Santanu
• 署名单位: Cornell University; Southern Methodist University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2010.12.010
• 发表日期: 2012
• 页码: 850-880
• 关键词: Stochastic growth; Sustained consumption; extinction; risk aversion

摘要

In a stochastic economy, long run consumption and output may not be bounded away from zero even when productivity is arbitrarily high near zero and uncertainty is arbitrarily small. In the one-sector stochastic optimal growth model with i.i.d. production shocks, we characterize the nature of preferences that lead to this phenomenon for a stochastic Cobb-Douglas technology. For the general version of the model, we outline sufficient conditions under which the economy expands its capital stock near zero and long run consumption is bounded away from zero with certainty. Our conditions highlight the important role played by risk aversion for small consumption levels. (C) 2011 Elsevier Inc. All rights reserved.