Henrik Amilon () and Hans-Peter Bermin ()
Henrik Amilon: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Hans-Peter Bermin: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Abstract: In this paper we extend Merton's (1975) classic stochastic version of the Ramsey model by allowing the government to control the expected growth rate of the labor supply. We characterize the solution to this control problem for general time-separable preferences, and derive an analytical solution for the CRRA case. The results show to what extent the planner, or government, increases consumption and welfare by taking an active role in controlling the economy. We also explore the implications of government control of labor growth for the term structure of interest rates and the effects of taxes on capital.
34 pages, First version: July 10, 2001. Revised: March 11, 2002. Earlier revisions: February 19, 2002.
Questions (including download problems) about the papers in this series should be directed to Prakriti Thami ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2021-12-07 07:46:08.