TY - JOUR
T1 - Stochastic optimal growth with risky labor supply
AU - Cai, Yiyong
AU - Kamihigashi, Takashi
AU - Stachurski, John
PY - 2014
Y1 - 2014
N2 - Production takes time, and labor supply and profit maximization decisions that relate to current production are typically made before all shocks affecting that production have been realized. In this paper we re-examine the problem of stochastic optimal growth with aggregate risk where the timing of the model conforms to this information structure. We provide a set of conditions under which the economy has a unique, nontrivial and stable stationary distribution. In addition, we verify key optimality properties in the presence of unbounded shocks and rewards, and provide the sample path laws necessary for consistent estimation and simulation.
AB - Production takes time, and labor supply and profit maximization decisions that relate to current production are typically made before all shocks affecting that production have been realized. In this paper we re-examine the problem of stochastic optimal growth with aggregate risk where the timing of the model conforms to this information structure. We provide a set of conditions under which the economy has a unique, nontrivial and stable stationary distribution. In addition, we verify key optimality properties in the presence of unbounded shocks and rewards, and provide the sample path laws necessary for consistent estimation and simulation.
U2 - 10.1016/j.jmateco.2013.08.002
DO - 10.1016/j.jmateco.2013.08.002
M3 - Article
VL - 50
SP - 167
EP - 176
JO - Journal of Mathematical Economics
JF - Journal of Mathematical Economics
SN - 0304-4068
ER -