The well-known approximation of the difference between the arithmetic average and geometric average returns as one-half of the variance of the underlying returns is reexamined using Jensen’s Inequality. The ”defect” in Jensen’s Inequality, is given an exlicit formula in terms of the...

The dynamics of a welfare maximizing, heterogeneous agent, one sector optimal Ramsey model is analyzed assuming two agents, each with a distinct discount factor and log utility. Production is Cobb-Douglas. Explicit time varying policy functions are derived, one for each period. A Twisted...

We provide a sufficient condition on the production function under which eventually the most patient household owns the entire capital stock in every Ramsey Equilibrium, called the turnpike property. This generalizes the result in the literature which establishes the turnpike property using the...

We address the fundamental issues of existence and efficiency of a Ramsey equilibrium with heterogenous discounting, elastic labor supply and borrowing constraints. In the first part, we prove the equilibrium existence in a truncated bounded economy through a fixed-point argument by Gale and...