In this paper, I present a theory of dynamic economic growth, business cycles, and asset pricing that integrates (1 … intertemporal consumption and portfolio decisions by risk-averse capitalists facing a contractual labor cost. …

substitutes. We find that there is a skill biasin cross-country technology differences. Higher-income countries use skilled … labormore efficiently than lower-income countries, while they use unskilled labor relativelyand, possibly, absolutely less …

drives higher rates of nationalsaving, the theory of speculative commodity storage and its implications for the time …

maximizationproblem by a recursive construction and derive many importantproperties. For example, precautionary savings and the …

Prospect theory has found an increasing attention in many fields of economics. However, it has scarcely been addressed … in a macroeconomic growth model. In an earlier paper we introduced prospect theory into a stochastic growth model. This … paper focuses on linking the Euler equation induced by such a prospect theory growth model to real macroeconomic data. We …

We compare the optimal capital stock accumulation in a classical Ramsey model with production shocks for a risk neutral … expected utility maximizer and a loss averse prospect theory maximizer. It is shown that in the expected utility case the … capital stock is on average the same as in the deterministic Ramsey growth model. However, with prospect theory one can expect …

representative agents coefficient of relative risk aversion to vary with the underlying economys growth rate. Existence of … risk aversion, the equilibrium risk free and risky security returns are demonstrated to have volatilities and an associated …