We study a stochastic, discrete-time, two-sector growth model á-la Solow (1956) characterised by perpetual growth. Assuming that exogenous i.i.d. shocks hit the physical production sector, we show that the capital dynamics can be converted, through an appropriate log-transformation, into an iterated function system converging to an invariant distribution supported on a Cantor set.
Stochastic shocks in a two-sector Solow model
Marsiglio S
2012-01-01
Abstract
We study a stochastic, discrete-time, two-sector growth model á-la Solow (1956) characterised by perpetual growth. Assuming that exogenous i.i.d. shocks hit the physical production sector, we show that the capital dynamics can be converted, through an appropriate log-transformation, into an iterated function system converging to an invariant distribution supported on a Cantor set.File in questo prodotto:
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