高宏Chapter2B概论.ppt

Chapter 2Part BThe Diamond Model 周泳宏 tzhouyhjnu@jnu.edu.cn The central difference between the Diamond model and the Ramsey-Cass-Koopmans model is that there is turnover in the population in OLG With turnover, it turns out to be simpler to assume that time is discrete rather than continuous t=0,1,2 rather than t=0 2.8 Assumptions Each individuals lives for only two periods Each individual supplies 1 unit of labor when he (she) is young and divides the resulting labor income between first-period consumption and saving; in the second period, the individual simply consumes the saving and any interest he (she) earns Lt individuals are born in period t Population grows at rate n A grows at rate g F(·) has constant return to scale and satisfies the Inada conditions Threre is no depreciation There is some initial capital stock K0 that is owned equally by all old individuals Markets are competitive Labor and capital earn their marginal products The firms earn zero profits Let C1t and C2t denote the consumption of young and old individuals in period t The utility function Ut denotes the utility of an individual born at t Since individuals no longer live forever we do not need a condition preventing lifetime utility from becoming infinitely large ρ 0 Individuals place greater weight on first-period than second-period consumption -1ρ 0 Individuals place greater weight on second-period than first-period consumption In period 0, the capital owned by the old and the labor supplied by the yound are combined to produce output The old consume both their capital income and their wealth; they then die and exit the model The young divide their labor income between consumption and saving. They carry their saving forward to the next period, thus This capital is combined with the labor supplied by the next generation of young individuals, and the process continues. 2.9 household behavior The second-period consumption of an individual born at t is Maximization problem Two w