Time as an Endogenous Random Variable Smoothly Embedded into Preference Manifold

Dai, Darong (2011): Time as an Endogenous Random Variable Smoothly Embedded into Preference Manifold.

Abstract

A general equilibrium model has been constructed in a stochastic endogenous growth economy driven by an Ito-Levy diffusion process. The minimum time to “economic maturity” for an underdeveloped economy has been computed both in the preference manifold of the modified Ramsey fashion and in that of the modified Radner fashion with its support, i.e., fiscal policies and savings strategy, endogenously determined. Furthermore, the effects of different information structures to the endogenous time have been thoroughly investigated, and local sensitivity analyses of optimal consumption per capita with respect to the initial level of capital stock per capita have been smoothly incorporated into the current macroeconomic model.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stochastic endogenous growth; Minimum time to “economic maturity”; Optimal taxation policies; Endogenous savings rate; Preference manifold; Information structure; Local sensitivity analyses; Optimal stopping time; Levy diffusion
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design

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