A Three-period Samuelson-Diamond Growth

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A Three-period Samuelson-Diamond Growth

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Title: A Three-period Samuelson-Diamond Growth
Author: Blomgren-Hansen, Niels
Abstract: Samuelson (1958) analyses a three-period model, whereas Diamod (1965) considers a two-period model. This difference poses the question whether the insights derived by analysing the simple two-period model carry over in the more complicated three-period case. They do. The Samuelson model (no productive capital) has only one positive solution (r = n); however, this root is unstable. The Diamond model (no nonproductive abode of purchasing power) has also only one positive solution; the root is stable but inefficient. In a model with both productive capital and a non-productive abode of purchasing power, the inefficient Diamond solution becomes unstable and the socially optimal solution becomes stable.
URI: http://hdl.handle.net/10398/7575
Date: 2005-11-16

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