Multisector Ramsey Model Flashcards
1
Q
Kuznets-Madison facts
A
2
Q
Set up of the multisector Ramsey model
A
3
Q
Household preferences
Firms production function
A
- CES
- Each sector has a CD with labor augmenting technological progress.
- alpha is the same for every sector
4
Q
Household problem
A
- They choose consumption composition
- Savings
5
Q
Elasticity of subsitution between goods
A
6
Q
Euler equation and expenditure shares
A
- Expenditures shares in this model are constant
- r is interest rate deflated by aggregate price index
7
Q
Assumptions on the production side
A
- Capital good are produced from manufactures in a 1-1 basis
- Labor an capital are perfecly mobile across industries
8
Q
Firm problem
A
- Relative factor use is same across all sectors
- Relative product prices are given by relative productivities (slide 16)
- There are more units in the market => their price have to be lower
9
Q
Equilibrium definition
A
Walras law implies clearing for manufacturing market
- Manufacture production=manufacture consumption + gross investment
10
Q
Nominal output share definition
A
- The first term is the definition. The last one is an implication of the model
- Capital share of the sector is also equal to the labor share
11
Q
Structural change
A
- We have structural change only when saving rate is changing
- There is no structural change within consumption goods sectors
12
Q
Law of motion of capital
A
13
Q
Dynamic system
A
=> allocations between sectors are irrelevant for aggregate variables
14
Q
General conclusions of the model
A
- Aggregate capital, consumption and output behave as in the one sector Ramsey model
- Along the BGP there is no structural change
- In the transition to the SS, there is no structural change between the agricultural and services sectors
