Stochastic optimal growth with risky labor supply

Yiyong Cai, Takashi Kamihigashi, John Stachurski

    Research output: Contribution to journalArticle

    Abstract

    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.
    Original languageEnglish
    Pages (from-to)167-176
    JournalJournal of Mathematical Economics
    Volume50
    DOIs
    Publication statusPublished - 2014

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