Flashcards: Ramsey-Cass-Koopmans Growth Model — 11 cards

Why can't the Solow model compare welfare between steady states?

Because its saving rate is exogenous.

RCK Model motivation label

Endogenizes saving, analyzes growth paths.

What does the Ramsey-Cass-Koopmans model endogenize?

Saving by allowing individuals to choose consumption and saving based on preferences and incentives.

Household population growth rate

Given by $n$, affects labor supply.

What is the population growth rate symbol in the model?

The population grows at rate $n$.

CRRA utility function

$u(C)=\frac{C^{1-\theta}}{1-\theta}$, risk aversion.

How does population growth affect the effective discount rate?

It changes the discount rate from $\rho$ to $\rho - n$.

Two-period consumption choice

Consumers allocate consumption over two periods.

Continuous-time Euler condition

Optimization condition for intertemporal consumption.

Steady state capital dynamics

Capital accumulation equals savings minus depreciation.

Golden Rule Patience level

Balancing saving and consumption for maximum steady-state capital.